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Perspective

Gen Re at NAMIC - The Feeling’s Mutual

October 10, 2016| By Berto Sciolla | P/C General Industry | English

Region: North America

Mutual companies rarely make the headlines, and yet they are an integral part of the U.S. insurance sector. Mutuals write more than $230 billion in annual premiums, accounting for 54% of the homeowners insurance market, 43% of the auto market and 32% of the business insurance market. They provide insurance for around 170 million auto, home, and business policyholders and the aftermath of the financial crisis highlighted their relative stability compared to stock companies.

Last month while attending the National Association of Mutual Insurance Companies (NAMIC) annual convention in Vancouver, I was asked by A.M. BestTV to share my thoughts on the evolving relationship between mutuals and reinsurers and how I see these roles evolving.

Mutual companies recognize the value of reinsurance from a risk management and volatility standpoint. We have a good relationship with the sector because there’s a strong alignment of interest between Gen Re and its customers. The alignment relates to gross underwriting profit in terms of building mutual companies and building their brands. Their success is our success, so the joint focus is on underwriting profit and investment income. We’re aligned in our objective of ensuring sustained profitability.

How is that business relationship going to evolve? The agenda at the conference reflected the need for mutual insurers to start thinking outside a "siloed" approach to their products. It also reflected the growing sophistication required of mutual insurers in terms of corporate governance and, linked to that, enterprise risk management.

The mutual business model has been successful for generations, but delegates at the annual convention in September heard how mutual companies now need to respond to change in the world of insurance.

They’re well-placed to do that. If we look at their capital and premium growth rate as a sector, mutuals don’t have any disadvantages compared to stock insurance companies. In fact, they have some advantages linked to their ownership structure, in terms of pricing their products.

While mutual insurers don’t always respond to change as fast as stock carriers, they do have tremendous staying power: While the top stock carrier names might change over the years, the mutual names remain pretty much unchanged.

The impact of these factors means there’s an increased emphasis on the management of not only liability risk and operational risk but asset risk, and reinsurance has an important role to play in all those components. At Gen Re we have the intellectual and financial capital to help secure a sustainable future for our longstanding clients in the mutual sector, whatever their size.

 

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