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Raising capital while maintaining mutuality

Raising capital while maintaining mutuality. Gregor Pozniak, Secretary General, AMICE Mutuals Forum 2012 London, 22 November 2012. Dedicated AMICE taskforce. “Capital maintenance” – “Sustainable finance” Map existing capital and hybrid instruments used by mutual/cooperative insurers

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Raising capital while maintaining mutuality

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  1. Raising capitalwhilemaintaining mutuality Gregor Pozniak, Secretary General, AMICE Mutuals Forum 2012 London, 22 November 2012

  2. Dedicated AMICE taskforce • “Capital maintenance” – “Sustainable finance” • Map existing capital and hybrid instruments used by mutual/cooperative insurers • Explore capital instruments used in cooperative banking • Explore provisioning techniques under Solvency II

  3. Analysis and discussion so far • Guarantee capital (Scandinavian countries) • limited amounts, from “friends” • Subordinated loans • Publicly offered (prospectus!) or not • “Listed” (= trading on RM) or not > accounting, transparency • See example “Gothaer Mitgliederanleihe” (members’ bond) • Supplementary calls • “Membership accounts” (NL, under strict supervision) • UK: PLADS • FR: Social shares / Perpetual securities

  4. EC Study on the current situation and prospects of mutuals in Europe • “Complying with insurance capital requirements is indeed a particular issue for mutuals” • “Larger mutuals competing with joint-stock competitors often have to grow to achieve appropriate risk diversification and economies of scale. They therefore, need good access to external capital while maintaining their mutuality.” • “However, allowing external capital (in any form) has consequences for their mutualistic values.” • see AFM blog of 20 Nov, www.amice-eu.org

  5. EC study (ch. 5.2.1. – financial rules) • Guarantee capital • Subordinate capital • Foundation capital (shareholder-like status in PL, repayment provisions in DE, AT) • Participation capital (in AT equity features, in DE more like bonds) • Profit-sharing certificates (DE) • Discretionary mutuals

  6. EC study (ch. 8.2.B. – Recommendations regarding establishing new mutuals) • Establish a fund to kick-start mutuals • Amend and modernise national frameworks “to make it clearer what the rules are for setting up mutuals” • Allow transition for start-up mutuals • Establish knowledge centres • specialised in the legal, managerial, and prudential aspects of mutuals • that could support and assist groups trying to establish a new mutual-type organisation serving their needs. • In addition, it could serve as a back-office for smaller mutual-type organisations handling the administrative issues.

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