RISK TRANSFER
We provide a broad range of strategic risk transfer and insurance advice for corporates and communities.
We provide comprehensive advice and assistance in the following areas:
1. Risk Transfer Program Design and Review:
- We specialise in designing and reviewing risk transfer programs tailored to your specific needs.
- Our expertise covers the integration and utilisation of:
- Fully authorised and regulated insurance mutuals
- Discretionary mutuals
- Captives
- Insurance
- Reinsurance.
2. Integration of Discretionary Mutuals:
- Discretionary mutuals, with a rich history spanning over a century, are a key aspect of risk transfer and management.
- Examples of successful discretionary mutuals include the Medical Defence Union, Benenden Health, UM Association, Unimutual, Fire & Rescue Indemnity Company, and digitised crypto mutuals like Nexus Mutual.
3. Creation of Mutuals for Communities and Associations:
- We can assist in establishing mutuals for communities and associations, harnessing their collective buying power.
- By leveraging the selective nature of mutuals, we ensure equitable outcomes and minimise cross-subsidisation between groups.
- Typically, 80% of claims are generated by 20% of the sector, and our experts help identify these groups accurately, resulting in tailored risk management standards.
4. Creation of Mutuals for Corporates:
- Our services extend to helping corporates establish mutuals within their overarching parent companies.
- This structure can be designed to support or preclude consolidation based on your specific requirements. Advantages of Mutuals
Advantages of Mutuals
Mutuals offer significant advantages to their members:
1. Ownership and Control:
- Mutuals are entirely owned by their members, ensuring no conflicting interests from shareholders seeking profits.
- Surpluses generated are used for the benefit of members, as agreed upon by them.
2. Governance and Tax Benefits:
- Mutuals are controlled by their members, with the majority of the board being drawn from within the membership.
- Surpluses within mutuals are exempt from corporation tax.
- Members deal directly with their mutual, minimising costs associated with extended placement chains.
Discretionary mutuals offer distinct advantages:
Advantages of Discretionary Mutuals
1. Classification and Regulation:
- Discretionary cover is not classified as insurance but is regulated as a company, not an insurer.
- Contributions for discretionary cover are not subject to Insurance Premium Tax (IPT).
2. Flexibility and Domicile:
- Discretionary mutuals exercise cover discretion, prioritising the best interests of their membership.
- Domiciled onshore in the UK, eliminating the need for offshore arrangements.
Types of Mutual Structures
There are three primary mutual structures:
1. Fully Discretionary Mutuals:
- All cover provided to members is discretionary, ensuring maximum flexibility.
- Any supporting insurance purchased is in the name of the mutual.
2. Hybrid Mutuals:
- Hybrid mutuals involve a base layer of discretionary coverage (mutual retention) and an excess layer of traditional insurance.
- This structure allows members to evidence insurance while managing a large excess within their mutual.
3. Fully Authorised and Regulated Mutuals:
- Examples such as NFU Mutual and Cornish Mutual fall under this category.
- These mutuals are subject to the full weight of insurance regulation, requiring capitalisation etc.
Expertise and Mutual Management
Designing, building, launching, and operating mutuals require specialised expertise. The typical aim of a mutual is to retain and handle all of the ‘expected’ claims.
Each mutual requires access to the same range of skill sets as that of a small insurer. Typically this is attained through either:
1. In-house Management:
- Employing a dedicated team to handle all aspects of mutual management.
2. Outsourced Mutual Management:
- Contracting a specialist mutual manager like Prospect Law.
- We provide comprehensive reports and guidance to the mutual's board without holding a seat on the board.
- Our instructions come directly from the board, and we operate on a fully transparent fee basis.
For expert risk transfer and insurance advice, contact us today to discuss your specific requirements.
