Solvency II and Mutual Insurance Companies

Markku Miettinen, Annina Pietinalho and Lauri Saraste

The purpose of this chapter is to discuss the importance and challenges of Solvency II for mutual insurance companies. Mutual insurers form a significant part of the European insurance sector. Mutual and mutual-type insurers have about quarter of the market share, and there are a total of 3,300 mutual insurers out of the 6,000 insurers in Europe.¹¹AMICE, 2012, “Facts & Figures – Mutual and Cooperative Insurance in Europe”, Brussels. The main difference between a limited company and a mutual company is that mutual insurer’s policyholders have a dual role in relation to the insurance company: they are both the customers and owners of the company. Policyholders of mutual insurers or their representatives usually have a key role in decisionmaking, and usually the company’s surplus capital also belongs to them upon liquidation. These basic characteristics of mutual insurers pose challenges to capital management within Solvency II because it is designed more for limited liability companies and their groups.

We will discuss what Solvency II’s risk-based capital requirements mean, and which kind of capital management measures are available for mutual insurers to manage their Solvency II