The environment in which mutual insurance companies must compete for policyholders, for revenue, and for capital is rapidly changing. To meet the challenges of the changing economic climate, mutual insurance companies in the United States, Canada and abroad have moved to restructure, recapitalize and adapt to their changed competitive circumstances. Mutual insurance companies have traditionally relied on retained earnings as the primary, if not sole, source of capital. This may not always provide the financial strength and flexibility needed to compete in a rapidly changing environment.
Preservation of options for mutual insurance companies to access capital is one of the National Association of Mutual Insurance Companies' (NAMIC's) most important goals. In order for mutual insurance companies to continue to thrive and prosper, they must not be denied the same ability to access the various capital markets as their stock competitors. NAMIC also believes it is important to recognize and protect the membership interest of mutual policyholders. It is equally important, however, to acknowledge that the ultimate interest of any policyholder is the continued financial viability of the insurance company.
This White Paper is intended to assist all parties interested in the future of mutual insurance companies to get beyond the "ownership" rhetoric and understand (1) the rights and obligations of the various constituencies who would be impacted by a mutual recapitalization or restructuring, including policyholders, boards of directors, and management; (2) that mutual insurance companies will approach capital alternatives through a careful and reasoned process; and (3) that mutual insurance companies have a wide array of choices, including some forms of restructuring, to meet their capital needs.
Inside this Paper