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Mutual Insurance Companies

A mutual Insurance Company is an insurance company owned

entirely by its policyholders. All profits earned by the company

are given back to policyholders in the form of dividenddistributions or a reduction in future premiums. Mutual

Insurance Companies were initially set up to insure houses

against damage caused by fire and are currently in operation in

most countries in the world.

In Ireland one example of Mutual Insurance Company is Liberty

Insurance. In 2011 Liberty Insurance acquired the business of

Quinn Insurance Limited Ireland. The head office is located in

Cavan and the company currently employed 1100 people.

Advantages and Disadvantages

Policy holders have the right to vote for the board of directors.

The board of directors decide how the profit is going to be used

(either add or distribute it to its members in the form of policy

dividends).

Policy holders can benefit from their economic participation by

availing premium reduction.

Policy holders have the right on mergers or dissolution

decisions.

Mutual Indemnity Association

A mutual Indemnity Association is a marine insurance

association which provides cover for its members. It is provided

by a Protection and Indemnity Club. Its members are ship-

owners or ship-operators. A mutual indemnity association

differs from marine insurance company in that it is answerable

only to its members, as opposed to its shareholders.

Mutual Indemnity insurance cover:

Loss of life and injury to crew stevedores, passengers and other

third parties.

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Collision damage caused to docks fixed or floating or collision

to other ships

Cargo loss or damage

Pollution

The Standard Club is an example of mutual indemnity

association it is own by its ship-owners members and controlled

by a board of directors.

Reinsurance

Reinsurance is a practice carried out by insurance companies

whereby they spread their risk portfolio among other insurance

companies under a reinsurance agreement. The insurance

company purchases insurance from another company (the

reinsurer) which agrees to pay out a proportion of the claims

incurred by the reinsurer for this cover is called the

reinsurance premium

Types of reinsurance:

1. Facultative, where the insurance is negotiated separately for

each insurance contract that is reinsured and

2. Treaty Reinsurance when the ceding company and the

reinsurer negotiate and execute a reinsurance contract. The

reinsurer then covers the specified share of all the insurance

policies issued by the ceding company which come within the

scope of thet contract.

Advantages:

Protect an insurer against very large claims

Reduce exposure to peaks and troughs

Lloyds of London

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Is a 324 year old British company insurance and reinsurance

market where underwriters and brokers come together to place

unusual risks. The main categories covered by Lloyds are:

Casualty (professional indemnity, medical malpractice)

Property (the New World Trade Centre)

Marine

Energy (oil rings)

Motor (high value vehicles and high risk drivers)

Aviation (aviation products, war and terrorist coverage)Reinsurance