2010-05-10 15:46:05 -

Mutual insurance companies have generally entered and emerged from the economic downturn in a strong position, but any advantage they currently have over conventional insurers could be short-lived, according to a new report by rating agency A.M. Best.

The research states that although mutuals in the main are well capitalised, as economies around the world continue to recover, their limited financial flexibility is among the biggest challenges facing the sector.

Yvette Essen, report author and head of market analysis for A.M. Best’s global financial services division, said growth potential for mutuals could become limited, given the difficulties facing mutuals in accessing the capital markets to raise money. “In comparison, conventional insurers quoted on the stock markets have greater opportunities to fund expansion

as the capital markets reopen,” she said.

A.M. Best’s report Mutuals Maintain Momentum, But Challenges Mount states that many mutuals have been able to grow during the recession but the planned introduction of Solvency II in 2012 is a major issue for some European mutuals. New insurance regulation could lead to some small and medium-sized mutuals ceasing to exist if capital demands become too onerous.

Ms Essen said: “Financing challenges are expected to create hurdles for some mutuals, particularly the smaller European ones, which are anticipating increased capital requirements from Solvency II. The need to also achieve scale, combined with the limited financing opportunities for mutuals, will lead to more affiliations, partnerships and joint ventures. The global mutual landscape could be on the brink of changing significantly.”


The report has been released ahead of the International Cooperative and Mutual Insurance Federation's 20th Meeting of Reinsurance Officials (MORO), to be held 16 -19 May 2010 at the Dorint Pallas Hotel in Wiesbaden, Germany. A.M. Best Co. will sponsor and participate in the conference.

To download a PDF copy of the full report at no cost, please visit www.ambest.com/research : .



Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com : .



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Essen, +(44) 20 7626 6264 yvette.essen@ambest.com : mailto:yvette.essen@ambest.com