Willis Re Releases Report on the Challenges and Opportunities of Diversification for Mutual Insurers
London, UK, May 2, 2012 – Willis Re, the reinsurance arm of Willis Group Holdings (NYSE:WSH), the
global insurance broker, has released a report discussing the challenges and opportunities offered to mutual
insurers through diversification.
The report, subtitled “Navigating the Pitfalls in Pursuit of Successful Diversification”, examines, through discussion and the
use of case studies, how the unique characteristics of mutual insurers mean that some are being
encouraged towards diversification by regulators and rating agencies, and considers some of the issues that need
to be addressed by mutuals to ensure success in diversifying.
The report explains that regulations introduced in association with Solvency II, and its equivalents around the world,
have encouraged some mutual insurers to consider exploring new lines of business or entering new territories
in order to benefit from the potential relief in regulatory capital calculations that diversification can offer.
In addition, a greater level of diversification invites favourable consideration from rating agencies.
mutual insurers are policyholder owned entities, and as such their capital is inherently less flexible than non-mutual
capital. The Willis Re report states that “committing capital to new lines of business or new
territories, especially where the organisation may only have limited expertise or experience, is intrinsically riskier for
mutuals given the relative importance of the capital at stake compared to nonmutuals.”
John Haydon, one of the authors of the report, commented “the potential benefit from diversification relief in
regulatory capital calculations makes this an ideal time to open a broad discussion on the issues
faced by mutuals when contemplating diversification strategies.”
Robin Swindell, joint author of the report, commented “A key lesson is to pursue diversification only where
it is in line with the long-term aims of the organisation, stands a reasonable chance of
being profitable, and does not come at the expense of a loss of focus on other
aspects of business.”
The report states that whilst reinsurance alone cannot resolve all the issues facing mutuals in the face
of diversification, it can offer significant benefits to in managing the process by recognising and reflecting
upon the unique nature of the relationship between a mutual and their members’ capital.
The report will be a topic of conversation for the Willis Re team attending this week’s 2012
International Cooperative and Mutual Insurance Federation (ICMIF) Meeting of Reinsurance Officials in Paris, at
which Paddy Jago, President of Willis Re, will be delivering the key note speech.
About Willis Re
One of the world’s leading reinsurance brokers, Willis Re is known for its world-class
analytic capabilities, which it combines with its capital markets and reinsurance expertise in a seamless, integrated
offering that helps clients increase the value of their businesses. Willis Re serves the risk management
and risk transfer needs of a diverse, global client base that includes all of the world's
top insurance and reinsurance carriers as well as national catastrophe schemes in many countries around the
world. The broker’s global team of experts offers services and advice that help clients make better
reinsurance decisions, access worldwide capital markets and negotiate optimum terms. For more information, visit www.willisre.com.
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops
and delivers professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to
corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly
120 countries, with a global team of approximately 17,000 employees serving clients in virtually every part
of the world. Additional information on Willis may be found at www.willis.com.