AMICE letter to the IAIS on branch structures
28 May 2013
In addition to other arguments in favour of permitting/maintaining branch structures, the mutual and cooperative insurance sector has a particular interest in keeping its policyholders in a host country as direct contract partners of the mutual/cooperative parent in the home country
Mutuals and cooperatives are characterised, among other features, by the special relationship between the insurer and its member-policyholders, a relationship that is commonly defined in the legal framework for the mutual/cooperative and further specified in the undertaking’s bye-laws.
Being a member of GFIA, AMICE follows and contributes to the discussion process among industry and endorses the comments that IAIS has received through the Global Federation. AMICE would however, as a reinforcement or complement, draw attention to the following arguments of particular importance for its sector:
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In addition to other arguments in favour of permitting/maintaining branch structures, the mutual and cooperative insurance sector has a particular interest in keeping its policyholders in a host country as direct contract partners of the mutual/cooperative parent in the home country because only then they are able to grant them all the statutory rights and governance opportunities foreseen (and appreciated by the members).
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Pushing foreign operations by mutual/cooperative insurers into the legal form of subsidiary plc-type undertakings severs the link between the mutual/cooperative parent and its member-policyholders.
AMICE asks the IAIS to include this thought in the descriptive passage (probably par. 12) about the industry’s main arguments in favour of branch structures. Moreover, AMICE appreciates that a reference (albeit in AMICE's view too briefly and superficially) is made to the consequences of a forced conversion of branches into subsidiaries. It is
absolutely true that “due consideration would be needed” (par. 88). Policyholder protection is mentioned there as a viewpoint from which to consider such decisions, but unfortunately only as the last item and in conjunction with financial stability.
AMICE argues that from the viewpoints of access to insurance, diversity of business models (which is proven to promote stability and competition), the nature of business and business strategy and, last but certainly not least, policyholder protection such a forced conversion would be detrimental and that no policies should be developed at the
international level to encourage or suggest such forced demutualisations.
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© AMICE - Association of Mutual Insurers and Insurance Cooperatives in Europe
