APPLICATION PAPER
ON THE REGULATION AND SUPERVISION OF
MUTUALS, COOPERATIVES AND COMMUNITYBASED ORGANISATIONS IN INCREASINGACCESS TO INSURANCE MARKETSSEPTEMBER 2017

About the IAISThe International Association of Insurance Supervisors (IAIS) is a voluntary membershiporganisation of insurance supervisors and regulators from more than 200 jurisdictions in nearly
140 countries. The mission of the IAIS is to promote effective and globally consistentsupervision of the insurance industry in order to develop and maintain fair, safe and stable
insurance markets for the benefit and protection of policyholders and to contribute to global
financial stability.
Established in 1994, the IAIS is the international standard setting body responsible fordeveloping principles, standards and other supporting material for the supervision of theinsurance sector and assisting in their implementation. The IAIS also provides a forum forMembers to share their experiences and understanding of insurance supervision andinsurance markets.
The IAIS coordinates its work with other international financial policymakers and associationsof supervisors or regulators, and assists in shaping financial systems globally. In particular,
the IAIS is a member of the Financial Stability Board (FSB), member of the Standards Advisory
Council of the International Accounting Standards Board (IASB) and partner in the Access to
Insurance Initiative (A2ii). In recognition of its collective expertise, the IAIS also is routinely
called upon by the G20 leaders and other international standard setting bodies for input on
insurance issues as well as on issues related to the regulation and supervision of the global
financial sector.

About IAIS Application Papers
Application Papers provide additional material related to one or more ICPs, ComFrame or GSII policy measures, including actual examples or case studies that help practical applicationof supervisory material. Application Papers could be provided in circumstances where thepractical application of principles and standards may vary or where their interpretation andimplementation may pose challenges Application Papers can provide further advice,illustrations, recommendations or examples of good practice to supervisors on how
supervisory material may be implemented.

This paper was prepared by the Financial Inclusion Working Group in cooperation with theAccess to Insurance Initiative.
The publication is available on the IAIS website (www.iaisweb.org).
© International Association of Insurance Supervisors 2017. All rights reserved. Brief excerpts
may be reproduced or translated provided the source is stated.

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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Application Paper on Regulation and Supervision of
Mutuals, Cooperatives and Community-based Organisationsin increasing access to Insurance Markets
Contents
List of acronyms .................................................................................................................... 4
1. Introduction ....................................................................................................................... 5
2. Description of the MCCO sector ........................................................................................ 8
2.1 General Definition of MCCOs and Key Defining Characteristics .................................. 8
2.2 Range of Organisational Forms ................................................................................. 13
2.3 Partnerships of MCCOs: Associations, Groups and Apex organisations ................... 14
2.4 Size of the MCCO sector ........................................................................................... 15
3. The Application of the Insurance Core Principles to MCCOs ........................................... 18
3.1 Proportionality in general ........................................................................................... 18
3.2 Formalisation and Licensing ...................................................................................... 19
3.3 Corporate Governance .............................................................................................. 26
3.4 Capital Requirements and Capital Resources ........................................................... 32
3.5 Portfolio-transfers, Mergers, Demutualisation and Winding-up .................................. 36
3.6 Supervision and Supervisory Review ........................................................................ 40
Annex 1: MCCOs as defined in various countries ............................................................... 43
Annex 2: Examples of the Role of MCCOs.......................................................................... 49
Annex 3: Examples of Associations of MCCOs ................................................................... 50

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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List of acronyms
A2ii
AMICE
CAGR
CGAP
IAIS
ICMIF
ICP
IFSB
ILO
MCCO
MCR
MIN
NGO
P&L
PCR
SMIU
UN

Access to Insurance Initiative
Association of Mutual Insurers and Insurance Cooperatives in Europe
Compound annual growth rate
Consultative Group to Assist the Poor
International Association of Insurance Supervisors
International Cooperative and Mutual Insurance Federation
Insurance Core Principle
Islamic Financial Services Board
International Labour Organization
Mutual, Cooperative and Community-based Organisation
Minimum Capital Requirement
Microinsurance Network
Non-Governmental Organisation
Profit and Loss
Prescribed Capital Requirement
Small mutual insurance undertaking
United Nations

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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1. Introduction
1.
The International Association of Insurance Supervisors (IAIS), through the InsuranceCore Principles (ICPs), 1 provides a globally accepted framework for the supervision of theinsurance 2 sector. Its mission is to promote effective and globally consistent supervision of theinsurance industry in order to develop and maintain fair, safe and stable insurance markets
for the benefit and protection of policyholders; 3 and to contribute to global financial stability.

There is a general recognition that enhanced access to insurance services helps
reduce poverty, improve social and economic development and supports major public policy
objectives such as improving health conditions for the population, dealing with the effects ofclimate change and food security. However, globally a large number of people remain
unserved or underserved by insurance. Insurance supervisors are increasingly looking for an
appropriate balance between regulation, enhancing access to insurance services andprotecting policyholders. The “mutual model,” featuring mutuals, cooperatives and community
based organisations (MCCOs), is one avenue which can potentially enhance access toinsurance for un(der)served households and firms, thereby enhancing access to insurance
more generally. This statement does not suggest that supervisors should give preferential
treatment to MCCOs. It in fact suggests that when seeking to enhance access to insurance all
avenues should be explored, including using MCCOs.
2.

3.
It should be noted that “inclusive insurance” and “access to insurance” are not issues
limited to emerging markets and developing economies. The terms inclusion and access areoften used synonymously representing a concept broader than microinsurance 4. They relate
to all insurance products aimed at the excluded or underserved market, rather than just those
aimed at the poor or a narrow conception of the low-income market, while microinsurance is
specifically aimed at low-income populations. Any type of insurer regardless of its size andlegal form can contribute to the enhancement of access to insurance.

About this paper. The purpose of this paper is to provide application guidance on theway the ICPs could be applied in a proportionate manner which should contribute to removing
unnecessary barriers by disproportionate regulation and supervision, while at the same timeensuring appropriate policyholder protection. While descriptions and examples of how MCCOs
operate and are supervised are provided from both developed and developing market
perspectives, the primary focus of this paper is for insurance supervisors who are seeking toenhance financial inclusion in developing markets.

4.

5.
A diverse range of institutions are commonly described as MCCOs, including mutuals,
mutual benefit organisations, cooperatives, friendly societies, burial societies, fraternalsocieties, community-based organisations, risk pooling organisations and self-insuring
schemes.

MCCOs can have an important role in inclusive insurance markets. As outlined in the2010 IAIS Issues Paper on the Regulation and Supervision of Mutuals, Cooperatives and otherCommunity-based Organisations in increasing access to Insurance Markets, their memberbased nature raises a number of issues that may require a dedicated regulatory and

6.

1 The complete set of ICPs including introduction, Principles, Standards and Guidance can be found on the public

section of the IAIS website (http://www.iaisweb.org/ICP-on-line-tool-689). The reference to specific ICPs,
Standards and Guidance in (the footnotes of) this paper may change as a consequence of ICP revisions.
2 Insurance refers to the business of insurers and reinsurers, including captives.
3 The IAIS Glossary defines a “customer” as a “policyholder or prospective policyholder with whom an insurer orinsurance intermediary interacts, and includes, where relevant, other beneficiaries and claimants with a legitimate
interest in the policy”. The glossary does not define “policyholder” although earlier papers had noted that
“Policyholders includes beneficiaries”.
4 Microinsurance is a business line for the low-income segment contributing to access and an inclusive insurance
market.
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Organisations in increasing access to Insurance Markets
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supervisory response. Many MCCOs operate as insurers; however, some also provide
administrative, educational and distribution services. Not all MCCOs need to function as
underwriters (in a formal or informal way). Some MCCOs can be considered “aggregators”,
i.e. entities that bring together people for non-insurance purposes (for example retailers,
service providers, utility companies, membership based organisations or civil society
organisations). These “aggregators” are then utilised by insurers, with or without theintervention of agents or brokers, to distribute insurance and - depending on the model - fulfil
additional functions such as administration and/or claims pay-outs. 5
7.
MCCOs have several specific features that distinguish from insurers that are sharecompanies, such as the fact that MCCOs are member-owned and involve theirmembers/policyholders in the governance of the organisation (see paragraphs 26 onwards).
Their ability to operate independently as stand-alone entities in remote and rural areas without
long distribution lines makes them a potentially important business model for improving accessto insurance. MCCOs can also develop beyond rural areas to become mainstream insurers
serving all the population, filling a gap for those who are un(der)served both in rural andsuburban areas. MCCOs can overcome geographic, cultural, service and product design
challenges which other insurers might not be able or willing to address in order to provide
insurance to low income populations.
8.
MCCOs typically collect the premiums from their members and pay out any claims
itself. Therefore, in principle, funds are retained and redistributed within the entity. Members
will pay premium or contributions into a pool held by the MCCO. These payments are used tocover the expenses such as claims made by members, the funding of provisions, and thefinancing of various operating costs. As an MCCO 6 does not generate profits to be paid out toshareholders as dividends, any surplus is reinvested in the MCCO or possibly paid out to or
used for the benefit of its members. However, if the financial results of the MCCO show adeficit the members may – in accordance with the provisions in the articles of association or
by-laws - be called to make supplementary payments. In a case whereby calls for
supplementary payments are not included in the articles of association or by-laws, or cannot
be met, the entitlement to loss compensation may be reduced to meet the available funds.
9.
This typical mode of operation has developed over time as MCCOs often originate
from solidarity and charity initiatives amongst social or professional groups where in the caseof a misfortune or event – like a fire at a farm or a death of a breadwinner – a collection would
be taken up for the benefit of those affected by the incident. In the course of time, thesepractices have been professionalised and MCCOs nowadays generally base their businesson sound insurance technical methods and practices including for premium calculation.
10.
The extent to which a legal entitlement exists may be a reflection of an evolution of an
MCCO, for example from an informal charity to a licensed MCCO. The report “Evolving
Microinsurance Business Models and their Regulatory Implications | Cross-country synthesis
note 1” 7 of the Access to Insurance Initiative (A2ii) states: “The local self-help model
represents the origin of insurance in many societies. It develops in the absence of appropriate
or accessible formal alternatives, where people do not trust formal options, or when individuals
prefer self-sufficiency based on solidarity. Strong community ties are generally a pre-requisite
to the development of the local self-help model.”11.
The year 2012 was proclaimed by the United Nations as the International Year of
Cooperatives (Resolution 65/184). General Assembly Resolution 66/123 recognises that
5 See paragraph 32, second bullet, of the Issues Paper on Conduct of Business in Inclusive Insurance

6 There maybe hybrid forms of MCCOs where part of the capital is supplied by shareholders who may becooperatives themselves.

7 Source: Access to Insurance Initiative, 2014. Evolving Microinsurance Business Models and their Regulatory

Implications | Cross-country synthesis note 1, p.20; Available at:https://a2ii.org/sites/default/files/reports/2014_08_08_a2ii_cross-country_synthesis_doc_1_final_clean_2.pdf

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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cooperatives in their various forms (including healthcare, housing, credit, agricultural products)“are becoming a significant factor of economic and social development and contribute to theeradication of poverty” 8 and refers to cooperatives as “sustainable and successful enterprisesthat contribute to employment generation, poverty reduction and social protection, across avariety of economic sectors in urban and rural areas”. The UN Secretary General reported thatcooperatives “through mutual companies, (…) provide social security protection in the form ofproperty / casualty insurance, medical insurance, and life insurance.” 9In the Pittsburgh Communiqué (September 2009), the G20 noted that the leaders
committed to “improving access to financial services for the poor” including to “support thesafe and sound spread of new modes of financial service delivery capable of reaching thepoor”. The experience of a number of countries has been that MCCOs can be one way toachieve these objectives as an active part of the market. For example, in January 2015 theChinese Insurance Regulatory Commission issued a pilot scheme for the development ofmutuals in China. The scheme aims at extending insurance protection to more Chinese people
by using the advantages of mutuals as non-profit bodies with a strong participation of membersin the governance.

12.

13.
It is recommended that supervisors, regulators and policymakers consider thisguidance (1) for the proportionate application of the ICPs to MCCOs and (2) for identifying andremoving unnecessary barriers in disproportionate regulation and supervision, while at thesame time ensuring the appropriate level of policyholder protection.
14.
The paper does not address the special case of insurers formed to provide Takaful.
The IAIS and the Islamic Financial Services Board (IFSB) have jointly issued the paper Issues
in Regulation and Supervision of Takāful (Islamic Insurance) (August 2006) as well as thePaper on Issues in Regulation and Supervision of Microtakāful (Islamic Microinsurance)(November 2015). The IAIS continues to collaborate with the IFSB with respect to standards
development.
15.
Throughout this paper, examples or observed responses have been included forillustrative purposes only and should not be considered to provide preferred solutions or bestpractices in addressing the issue(s) concerned.
16.

Structure of the paper. This Paper is structured as follows:•

Section 2 provides a description of the main features and background of the MCCO sector.
This should assist in providing an adequate understanding of the context in which the ICPs
could be applied in a proportionate manner as described in paragraph 8 of the Introduction
to the ICPs. For that purpose this section provides a definition of MCCOs and describes
the key defining characteristics and range of organisational forms. Also, Federations,
Associations, Groups and Apex organisations that are sometimes used are discussed asthese might affect the application of some ICPs and call for specific guidance. Finally inthis section details on the quantitative size of the MCCO sector are provided.

•

Section 3 deals with relevant ICPs and contains the application guidance. After a general
section on proportionality, the ICPs are for this purpose clustered into: Formalisation andLicensing; Corporate Governance; Capital Requirements and Capital Resources;
Portfolio-transfers, mergers, demutualisation and winding-up; Supervision general,
Supervision and Supervisory Review.

8 http://www.un.org/en/events/coopsyear/index.shtml /http://undesadspd.org/Cooperatives/UNDocumentsonCooperatives.aspx
9 “Cooperatives in social development and implementation of the International Year of Cooperatives”, 13 July2012 (68/168)
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Organisations in increasing access to Insurance Markets
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2. Description of the MCCO sector
17.
This section provides a description of the main features and background of the MCCO
sector, which should assist in an adequate understanding of the context in which the ICPs
could be applied in a proportionate manner, in particular in order to further enhance access toinsurance. There is particularly a clear distinction in the legal form between MCCOs and sharecompanies. Supervisors should be familiar with this distinction.

2.1 General Definition of MCCOs and Key Defining Characteristics
18.
MCCOs exist across the world, both in the developing as well as in developed
economies. In developing countries, at times they may appear as voluntary associations forpooling money to share risk or to assist each other during adversity, such as death. In thedeveloped countries, MCCOs retain their typical characteristics, while operating andcompeting in the same markets as commercial insurers. A range of financial services including
insurance, pensions, savings and credit are provided through them either to their members or
to the public.

There is no universal definition of mutuals. The European Commission provides auseful reference point for defining Mutuals. 10 “(Mutuals are) voluntary groups of persons(natural or legal) whose purpose is primarily to meet the needs of their members rather thanachieve a return on investment.” It has also defined mutuals as: “enterprises providing life andnon-life insurance services, complementary social security schemes, and small value services
of social nature”. 11
19.

20.
It is relatively easier to define the cooperatives. The most commonly agreed upondefinition is from the World Cooperative Monitor (2014) 12 stating that a cooperative is “anautonomous association composed mainly of persons united voluntarily to meet their common
economic, social, and cultural needs and aspirations through a jointly owned anddemocratically controlled enterprise which acts according to internationally agreed uponvalues and principles as outlined by the International Co-operative Alliance. Members usually
receive limited compensation, if any, on capital subscribed as a condition of membership”.
21.
The Association of Mutual Insurers and Insurance Cooperatives in Europe(AMICE) 13defines “Mutual and cooperative insurers, i.e. insurers in the legal form of a mutual
or a cooperative, as owned or controlled and governed by their members. Their objective is toinsure their members, natural or legal persons, against risks they face.”

The International Cooperative and Mutual Insurance Federation (ICMIF) has provided
a description of mutual microinsurance. According to ICMIF 14: “Mutual microinsurance is amechanism to protect people against risk in exchange for payments tailored to their needs,
and in a manner where they participate in the design, development, management andgovernance of such product, services or institutions. Mutual microinsurance is deemed to be
inclusive as it encompasses all types of low income or marginalized groups which may not fallunder the conventional microinsurance definition”.
22.

Therefore, it is clear that different definitions have extended the definitional scope of
MCCOs to include organisations that operate on mutual/cooperative principles without being

23.

10

http://www.europarl.europa.eu/document/activities/cont/201108/20110829ATT25422/20110829ATT25422EN.pdf
11 https://ec.europa.eu/growth/sectors/social-economy/mutual-societies/; See also the Study by the European
Commission on the current situation and prospect of the mutuals in Europe(http://ec.europa.eu/DocsRoom/documents/10390/attachments/1/translations)
12 Published by the International Cooperative Alliance (ICA).
13 AMICE Facts and Figures 2012
14 ICMIF 5-5-5 Mutual Microinsurance Strategy 2016
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Organisations in increasing access to Insurance Markets
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restricted by legal definitions - of which there is a wide variety across the globe, some of which
are particular to one country alone. Through the review of the above definitions, it is possible
to derive some key defining characteristics of those MCCOs which are involved with insurance
in one or another form, namely:•

Member ownership: At least some of the beneficiaries of the services provided by theorganisation are, by virtue of their membership, also owners of the organisation or havepowers similar to those held by owners in shareholder organisations 15.

•

Democracy: By exercising ownership type powers, the members form the general
assembly of the organisation and, through this forum, can exercise democratic rights on
ultimate decision making such as the election of directors to the governing board.

•

Solidarity: The extent to which members are seeking a beneficial outcome where thebeneficial outcome is reliant on the membership of the group. This concept is particularly
relevant to the issue of capital.

•

Created to serve a defined group and purpose: The organisation is established andmembers become affiliated with the organisation through a common goal, purpose, orcharacteristic.

•

Not-for-profit: The profit (or surplus) or loss (deficit) is accrued to the members. In thecase of losses, there can be a variety of treatments depending on the regulation in eachjurisdiction.

Membership
The element of member participation in the nature of ownership of the entity doessuggest room for differences in the regulatory arrangements or supervisory focus. In particular,when only policyholders - and no shareholders - exist in an insurance company, the existence
and management of any conflicts of interest are resolved solely in the interests ofpolicyholders, whereas it is not as clear how conflicts of interest are addressed between theinterests of shareholders and policyholders in a share company. 16
24.

25.
There is, however, a complicating feature. In some cases, either legally or in practice,not all policyholders may have the same rights and the same effective representation on theboard of directors. In some entities, mainly larger MCCOs, there is a feature of partial
ownership where some of the policyholders are members and owners whilst others are not.
This could be based on the need for regulatory compliance or a business strategy. In suchpartial member ownership situations, there is a potential conflict between the member owners
and the other policyholders who do not have ownership rights. In other cases, one or morecategories of policyholders may be entitled to different ownership rights than others. It is
possible that although the legal equivalence may exist between groups of members, there
may be decisions required in the management of the organisation that have to weighcompeting interests between groups of members - such as those with one type of insurance,and others with a different type or, in entities where insurance is not the core businesspurpose, and between those with insurance and those without insurance. In such situations,depending on the orientation of the decision making body, it may be that some potential
conflicts would arise that need to be balanced.
15 Member ownership in MCCOs is not identical to shareholder rights and obligations although it may carry manyof the same opportunities such as the right to vote at annual meetings or appoint board members. Most critically,member rights in MCCOs are not usually able to be sold / transferred at will as is the case for shareholders.
16 Note that, in line with the broader definition used in the ICPs, policyholders includes beneficiaries. In particular,
third party liability claimants are third parties but the protection of an insurance supervisory framework remains
applicable and it is intended that it be read accordingly. With respect to any regulatory and supervisory
adjustments for MCCOs, it needs to be recognised that third party beneficiaries are not usually members of amutual organisation but the protection of the regulatory and supervisory framework should extend to them.

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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Democracy
26.
MCCOs are usually governed by boards elected or appointed by the membership insome fashion or another. This means in principle that members have the right to be involvedin the selection of the board, to participate in meetings of the general assembly of themembership, and make such decisions as the articles of association allocates to the general
assembly.
27.
In smaller MCCOs, achieving the democratic objective is easier than in larger ones.
For larger or more geographically dispersed groups, MCCOs sometimes adopt a sub-electoral
process such as on a regional basis or by groups of policyholders or by type of product orservice, or some other means of ensuring that the voice of the members is represented at thegeneral assembly. Some UK friendly societies operate governance via a ‘delegate' system:
local branches nominate an individual to take forward their views to the mutual's General
Meetings. The delegate is expected to represent the interests of all the members in the branch.
These processes can reinforce the process of democracy and strengthen the functioning of
the democratic process even in very large organisations. Equally, it is important that suchprocesses do not prevent the voice of ordinary members from being expressed at meetings.
The manner in which the democratic process is put into effect can also be determined inassociation with the history or nature of the membership or the defined group and purposethat forms the organisation.
28.
As the effectiveness of the democratic process of the membership decreases, there isan increasing potential for particular groups to capture the democratic process. The most usual
concern is that the management might carry a greater weight than is desirable, thus creating
an agency problem. In addition, the same result may occur between various groups ofmembers where the access to the democratic process can be variable between them. One
special case of different groups of members might exist when the state is a member of theorganisation – a feature of some historic arrangements that continues in some jurisdictions.
29.
A sound democratic process also depends on both the access of members to thevoting process as well as their being informed and able to make the relevant decisions thatcome before them. The process of informing members of the content and timing of mattersthat they are to consider is as important as the process by which they actually can attend andexercise their voice.
30.
It should be noted that while "democracy" is a characteristic of MCCOs, this does not
reduce the need for independent supervision to protect policyholders from a prudential andconduct of business perspective, and to promote financial stability.

Solidarity
MCCOs have, in most cases, a mutual or self-help origination and they provide asource of risk pooling for the membership as is already mentioned in paragraph 8. The
consequence of this can be two sided. Although members benefit from the diversification of
the risk pool, they may also collectively underwrite the performance of the pool with the
implication that members will make additional contributions in the event that the financial
performance of the pool requires such contributions. This concept, sometimes officially statedin the articles governing the MCCO and sometimes implied, is referred to as solidarity.

31.

32.
Solidarity can differ from the stock company equivalent where shareholders might beprepared to support losses but would not generally be required to do so further than a defined
amount and could be considered to do so on commercial terms. For a MCCO, however, thedecision to pay further amounts may be made on both commercial and other more social
reasons reflecting the sense of solidarity between members of the group.

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
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33.
The strength of solidarity can vary and is closely linked to the other aspects discussed
in this section.

Related to the issue of solidarity is the question around benefits being guaranteed;meaning in this respect the extent to which a possible claim is legally enforceable, or can be
mitigated, or is subject to a decision by the MCCO. Various options can occur:
34.

•

A claim is discussed by the group without any legal entitlement to compensation. The
MCCO or the MCCO’s Board or a council in the MCCO will discuss the merits of the claim
with consideration for the member’s personal need for assistance. This lack of legal
entitlement to compensation may be grounds not to consider the specific MCCO as aninsurer for the purpose of insurance regulation and supervision.

•

Alternatively, the MCCO could limit any formal claim according to available funds in the
MCCO – therefore limiting the legal entitlement of the member 17. Since there is in principle
a legal entitlement to compensation, there are grounds to assume the existence of an
insurance contract and a need to protect the interests of the customers involved.
Discretionary Mutuals: examples from the United Kingdom and Australia
A discretionary mutual is a mutual which does not engage in or carry out insurance orreinsurance business; where a member who suffers a loss resulting from a “qualifying” risk
or contingency (i.e. one previously specified by the mutual as one which it may indemnify
members against), can apply for a grant of assistance to meet all or part of the costs
associated with such loss. The member, however, has no contractual or other form of legal
or equitable right to receive any compensatory payment. The mutual has absolute discretion
whether to indemnify a member, on the mutual principle, who suffers a loss resulting froma “qualifying” risk or contingency. 18
Examples of discretionary mutuals:•

The Military Mutual

Established in 2010 with no shareholders, The Military Mutual (TMM) is run for the benefitof its members, meaning that surpluses can be used to support military community andcauses.
TMM offers a range of policies that cater to the needs of serving members, reservists andveterans from the Royal Navy, Army and Royal Air Force.
•

The NFRN Mutual

The NFRN Mutual was established in 1999 offering cover to newsagents and other retailers,
providing an alternative to conventional insurance. They were created by retailers forretailers to provide Members with competitive cover, good service and a sympathetic claims
settlement ethos. The NFRN Mutual is a limited company.
•

Unimutual

Unimutual is a member-owned company limited by guarantee. Unimutual Limited‘s AFS
Licence became operational on 31 December 2003. Unimutual is a discretionary mutual
authorised to issue its own financial product, which is membership of the mutual and risk
protection offered to Members. Membership of the mutual and the protections offered to theMembers are subject to the discretion of the Unimutual Board. Under its AFS Licence,
17 Alternatively, to enable payment of claims the MCCO’s internal regulation or by-laws may give it the legal

possibility to collect (additional) premiums / contributions from the members, so-called members’ calls (seeparagraph 108).
18 Study on the current situation and prospects of mutuals in Europe, Final Report, Panteia, November 2012
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Organisations in increasing access to Insurance Markets
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Unimutual is also authorised to provide financial product advice and deal in generalinsurance products for wholesale clients. This means that, for risks for which it does notprovide discretionary protection, Unimutual is licensed to arrange insurance for Members.
Since its small beginning in 1990 with four universities, Unimutual has grown to become themajor provider of asset and liability risk protection to the higher education and researchsector. Membership is now comprised of the majority of Australian universities, together
with associated entities ranging from small residential colleges and conservatoria of music
to large research entities.
•

Benenden

Benenden Healthcare Society Limited an incorporated friendly society, registered under the
Friendly Societies Act 1992. The core element of its standard product is a discretionary
healthcare product. The product includes tuberculosis cover, which is provided on acontractual basis, and which amounts to around 1% of premium income. With regard toregulation, the discretionary and contractual elements of the product are treated differently.
The Society´s contractual business (the provision of tuberculosis benefit) is authorised by
the Prudential Regulation Authority, and regulated by the Financial Conduct Authority and
the Prudential Regulation Authority. The remainder of the Society´s business is undertaken
on a discretionary basis, and the Society is subject to Prudential Regulation Authority
requirements for prudential management.

Created to serve a defined group and purpose
MCCOs are usually formed by a defined group of people for a defined purpose. While
MCCOs often start with a defined purpose including risk pooling among a particular group ofindividuals, businesses or municipalities, as they grow they often expand the purpose toaddress other purposes or groups of risks. This results in diversification and a greater ability
to spread risk beyond a particular group of similar policyholders in a manner that can help
minimize the impact of claims on the original group of members. Often, legal requirements
oblige that they maintain a definition of membership and/or purpose in an ongoing fashionsuch that new members are also part of the defined group or purpose.

35.

The defined group or core purpose of the MCCO may be the insurance function.
Alternatively, in particular for cooperatives, the insurance function may be ancillary and thecore purpose may be something else such as, the sales of agricultural products or charitable
and religious purposes. The membership may have a common definition that is limited or
broad and may be geographically close or dispersed.

36.

Depending on the circumstances, the strictness of the definition of the groupmembership and purpose may be reflected as part of the regulatory or supervisory treatment
or may influence how other aspects are considered. The definition may strengthen otheraspects of mutuality or, in others, steps may be required to reinforce these aspects and ensure
they are functional.
37.

In the report “Evolving Microinsurance Business Models and their Regulatory
Implications | Cross-country synthesis note 1” 19 of the A2ii, MCCOs are categorised in termsof microinsurance business models under “local self-help” characterised by the fact that “agroup of persons (such as a mutual or another community-based organisation) pools its own
risk.” The report also states: “The biggest incentive for the self-help group to offer insurance
to members is that members experience risks which they are unable to mitigate on their own,
yet they do not have access to affordable formal insurance. The local self-help group model
38.

19 Source: Access to Insurance Initiative, 2014. Evolving Microinsurance Business Models and their Regulatory
Implications | Cross-country synthesis note 1, p.20; Available at:https://a2ii.org/sites/default/files/reports/2014_08_08_a2ii_cross-country_synthesis_doc_1_final_clean_2.pdf

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allows individual members to pool risk among members, thereby mitigating the financial impactof risks. In some instances an external party, such as an NGO or technical assistance provider
may encourage the formation of groups and render some services to the groups.” If the latteris the case both the group and the supervisor should be aware of business continuity risks
connected with the discontinuation of the technical assistance. Alternative solutions should
then be sought or preferably be pre-arranged for that eventuality.
Not-for-profit
39.
MCCOs, by their nature, accrue surpluses (or perhaps deficits). These surpluses aremaintained or distributed for the benefit of the members. 20 It is notable that this surplus accrualand maintenance can be for members collectively rather than individually and separately.
Accrued surplus also has a characteristic of being maintained, at least to some extent, acrossgenerations of membership. In the long term, there may be some part of retained surplus that
arose at a time when none of the current members held membership. The method of
distribution of any surpluses may take place through benefit increases or premium reductions
similar to participating products offered by shareholder firms but may also include investments
in providing ancillary services or contributing to community projects oriented to improved wellbeing. Regardless of the method of distribution, issues of equity in the distribution may be
critical and therefore supervisors could take a proactive approach in protecting the interestsof policyholders in defining the use of accumulated surpluses.

2.2 Range of Organisational Forms
Range of organisational forms considered as MCCOs
40.
For the purposes of this paper, MCCOs include a very diverse range of types oforganisation and may be described differently in different jurisdictions. MCCOs may include
organisations and institutions that are:•not registered under any specific law or regulation;•

recognised under a specific law even if not distinguished for insurance purposes;•

recognised under the insurance law itself.
Examples of such MCCOs include:

41.
•

Mutuals•

Mutual Benefit Organisations•

Cooperatives•

Friendly Societies•

Burial Societies / funeral assistance providers•

Fraternal Societies•

Community-based organisations•

Risk pooling organisations•

Self-insuring schemes. 21

20 See also paragraph 108

21 This paper addresses self-insurance schemes where those self-insurance schemes insure a group who also
effectively sponsors or owns the scheme and that it operates on a not for profit basis.

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42.
Annexes 1 and 2 contain an overview of MCCOs and their purposes as defined invarious jurisdictions. It is clear that MCCOs definitions vary from one jurisdiction to another.
Some forms of MCCOs may not be covered under the regulations and exist informally. The
coexistence of different forms could be attributed to the historical and socio economic
background of the society. For example, in Japan cooperatives are eligible to do "Kyosai"(mutual aid) business and in the UK friendly societies emerged to cope with unpredictable
catastrophic events or acute / terminal illness. Through state regulation, the latter societies
were further involved in providing formal life insurance to their members. Burial Societies (inmost of Africa) evolved from the need to fund funerals or hospitalisation costs. These societies
had both social and economic functions within the community.
43.
The discussions on legal definitions and forms of MCCOs could be concluded with theunderstanding that based on demonstrated needs, communities have chosen to organise
themselves. These organised / semi organised groups have essentially worked for the benefitsof members exclusively. With time, faith and trust earned from members has allowed theseorganisations to get attention from the government and attempts were made to regularise andacknowledge them as formal institutions. With such acknowledgements (through government
regulations) - these organisations have shown significant growth which is discussed in section
2.4 and which highlights the role of enabling regulations to realise the potential of MCCOs inemerging markets.

2.3 Partnerships of MCCOs: Associations, Groups and Apex
organisations
44.
MCCOs may choose to organise themselves in groups and in member-driven
organisations like associations. This could create various advantages or disadvantages froma business or regulatory perspective.

Associations
MCCOs have larger potential to deliver inclusive insurance by collaborating anddeveloping partnerships amongst each other. Such partnerships could be termed asassociations of MCCOs that could exist at the national or regional level. A few examples ofeach classification are included in Annex 3 of this paper for the purpose of building an
understanding on the need and importance of such bodies.
45.

46.
Such partnerships would enhance group solidarity, enable peer based learning,develop a code of conduct and engage in joint financial education activities. In addition, they
represent their members towards the public and engage in a dialogue with the authorities, forexample to lobby for tax benefits or to contribute to a National Financial Inclusion Strategy.

Groups and Apex Organisations
MCCOs are sometimes organised in group structures. At the top of the group there
would be a parent company or apex organisation 22. The parent company could for example
be a cooperative of which the various MCCOs are a member. Their membership allows themto cooperate and benefit from joint arrangements. Participation by MCCOs in a group structure
would enhance group solidarity, and provide the much needed scale to the effort of delivering
insurance to the un- or underserved. The “parent” cooperative could for example also provide

47.

22 See paragraph 49.

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insurance technical expertise or actuarial services or make collective reinsurance
arrangements.
As an example 23, the Société de Groupe d'Assurance Mutuelle (SGAM) 24 was createdby French Law with the Ordinance of 29 August 2001 based on the SGA (sociétés de grouped'assurance), the existing model for public limited companies with the aim of enabling thepartners of the group to manage important and sustainable financial solidarity links. The
mutual group structure is open to all legal types of European insurance undertakings, (PLCs,
P&C or health mutuals, cooperatives, pension providers or reinsurers) provided at least oneof the organisations is headquartered in France and thus compliant with the insurance code 25.
The SGAM itself cannot sell insurance. Its purpose is to manage investments and to delineate
the strategy of the group. It is the Affiliation Agreement (between the SGAM and its member
companies) that describes the links, duties, commitments, cost sharing and all other forms ofcooperation. This legal tool is considered by mutual insurers as a useful instrument tocooperate and/or consolidate without losing their mutual identity 26.

48.

49.
Apex organisations are entities that are formed to provide services to groups of
MCCOs or to facilitate groupings of such organisations, or both. They can be owned or
operated by the group of organisations that they provide services to, or can be more
independent in legal terms. 27

For the supervisor the existence or possible use of these constructions can be relevant.
If, for example, the organisational size of the mutual is too small to allow the hiring ofspecialists such as actuaries, this expertise can be sourced in from the parent company or an
apex organisation. It will then be important to involve these entities in the supervisory reviews.
In addition, supervisors could rely on the parent company / apex organisation for datacollection or compliance with requirements (for example training of agents).

50.

2.4 Size of the MCCO sector28
51.
Globally, the mutual insurance sector wrote a record level of business in 2014, withaggregate premiums of US$ 1,286 billion, up 1.3% from the previous year (2013: US$ 1,269
billion). The mutual sector posted its seventh consecutive year of positive premium growth in2014 with year-on-year growth since 2007, demonstrating a flight to quality since the onset ofthe financial crisis. Annual growth of the mutual sector was greater than the global market
average in five of the previous seven years. Since 2007, mutual insurers collectively registereda compound annual growth rate (CAGR) of just under 4% between 2007 and 2014, more thandouble the CAGR of the total market during the same period (+1.8%).

23 Source: ICMIF

24 The SGAM is included in the Insurance Code (Code des assurances), articles L 322-1-2 and L 322 1-3(Decree D 2002-943 of 26 June 2002 to transpose the Directive 98/78/CE of the European Parliament and theCouncil of October 27 1998 on the supplementary supervision of insurance undertakings in an insurance group).
25 Jointly administered by the social partners, i.e. employers’ and employees’ organisations.
26 Examples of SGAMs existing in France are: Covéa (MAAF, GMF, MMA, 2003); SMABTP (SMABTP, SMAvie
BTP, 2006);AG2R Prévoyance, La Mondiale (2007); Sferen (MACIF, MAIF, MATMUT, 2010); and MACSF(MACSF, le Sou Médical, 2009).
27 See paragraph 3.38 and footnote 16 of the Application Paper on Regulation and Supervision supporting
Inclusive Insurance Markets
28 Sournce: 2016 ICMIF Mutual Market Share report (https://www.icmif.org/news/mutual-and-cooperativeinsurers-continue-expand-their-global-reach-latest-icmif-global-mutual). ICMIF’s definition of “mutual” includes
organisations whose legal status may not be classified as such in their national law, but whose structure andvalues reflect the mutual/cooperative form, i.e. companies which are owned by, governed by and operated in theinterests of their member policyholders. These include limited companies owned by people-based organisations,fraternal benefit societies (fraternals), friendly societies, Takaful providers, reciprocals, nonprofits, exchanges,
discretionary mutuals, protection and indemnity (P&I) clubs, community organisations and foundations.

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52.
As a result of mutual insurers’ outperformance of the total insurance market, the global
market share of the mutual sector increased from 23.7% in 2007 to 27.0% in 2014 - a
proportional increase of 14%.

Global premium growth 2007-2014

The above figure shows 2014 was the fifth consecutive year of premium expansion for
the global insurance market, resulting in aggregate premium volumes that were 13.6% greaterthan pre-crisis (2007) levels. In comparison, the global mutual insurance sector reported a
29.6% increase in premium income during the same seven-year period.

53.

Regional market and mutual compound annual growth rates (2007-2014)
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54.
Between 2007 and 2014, the CAGR of the mutual sector exceeded that of the rest of
the insurance industry in four of the five global regions. The total market in Europe and North
America saw little change in premium volumes between 2007 and 2014: a small contractionin the European market (-0.3%) and a negligible increase in the North American market(+0.7%). In contrast, the mutual insurance sector in Europe and North America increased by
3.9% and 3.8% respectively, thus outperforming the total market by more than three
percentage points in both regions.
55.
Mutual insurers in emerging markets recorded their strongest premium growth since2007, with Latin American mutuals reporting the highest growth rates (CAGR of 14.4%
compared to 11.3% for the total market). African mutuals grew at a CAGR of 12.4% between
2007 and 2014, almost 10 percentage points greater than regional average of 3.1%.
56.
Asia and Oceania was the only region where average mutual growth since 2007 did
not exceed that of the total market. Mutual insurers reported a CAGR of 2.8%, which was halfof the CAGR for the total market (+5.6%).

EuropeNorth America
Asia & Oceania
Latin America
AfricaGlobal

2014
31.2%
35.5%
16.1%
12.1%
2.1%
27.0%

2007
23.3%
28.8%
19.5%
10.0%
1.2%
23.7%

Mutual and cooperative market share: 2007 – 2014 comparison
57.
Global: The global mutual market share of mutual insurers increased from 23.7% in2007 to 27.0% in 2014 (a proportional growth of 14%). Regional breakdown: Latin America
was the region with the fastest mutual premium growth over the seven year period 2007 to2014, with a mutual market share of 12.1% in 2014 (2013: 10.0%). Despite much lower mutual
insurance penetration in Africa compared to other regions, market share almost doubled from
1.2% in 2007 to 2.1% in 2014. 29

Global Countryrank*

Mutual market share
2014
2013
2012

% growth
2013-2014

1
2
3
4
5
6
7
8
9
10

37.1%
40.8%
7.7%
0.3%
47.4%
44.4%
23.9%
10.4%
19.1%
51.0%

+1.1%
-5.4%
+1.3%
-15.7%
+2.0%
+1.9%
+2.4%
+1.6%
-1.6%
+3.3%
Total

USA
Japan
UK
China
FranceGermany
Italy
Korea (Rep)
CanadaNetherlands

36.7%
43.1%
7.6%
0.3%
46.5%
43.5%
23.4%
10.2%
19.5%
49.3%

34.6%
45.0%
7.8%
0.3%
45.0%
43.2%
20.3%
9.4%
19.3%
49.2%

% shareof global
market*
26.9%
9.5%
7.4%
6.9%
6.6%
5.3%
4.1%
3.4%
2.6%
2.0%
74.8%

Mutual market share in the top ten insurance markets 30 31% sharemutualmarket
36.9%
14.4%
2.1%
0.1%
11.6%
8.8%
3.6%
1.3%
1.9%
3.8%
84.5%

29 Global Mutual Market Share 2014 ICMIF, 2016. For further information: http://www.icmif.org/global-mutualmarket-share-2014 (accessed 16.09.16)
30 Global Mutual Market Share 2014 ICMIF, 2016. For further information: http://www.icmif.org/global-mutualmarket-share-2014 (accessed 16.09.16)
31 Global rank and % share of global market as per adjusted figures from Swiss Re World Insurance in 2014

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3. The Application of the Insurance Core Principles to
MCCOs
58.
While descriptions and examples of how MCCOs operate and are supervised areprovided from both developed and developing market perspectives, the primary focus of thispaper is for insurance supervisors seeking to enhance financial inclusion in developing
markets. This section intends to provide application guidance on the way the ICPs could beapplied in a proportionate manner to MCCO’s which should contribute to removing
unnecessary barriers by disproportionate regulation and supervision. The guidance included
herein does not apply to MCCOs in the role of intermediary unless the ICP in question has
explicitly indicated that it does. 32 As described in Section 2 organisational forms and structures
can vary, thus depending on the MCCO, supervisors should apply the ICPs at a legal entity
and/or group-level, taking proportionality into account. 33

3.1 Proportionality in general59.
The ICPs provide a globally accepted framework for the supervision of the insurance
sector. The ICP statements prescribe the essential elements that must be present in the
supervisory regime in order to promote a financially sound insurance sector and to provide anadequate level of policyholder protection. Standards set out key high level requirements thatare fundamental to the implementation of the ICP statement and should be met for a
supervisory authority to demonstrate observance with the particular ICP. 34 The ICPs apply toinsurance supervision in all jurisdictions regardless of the level of development or
sophistication of the insurance markets and the type of insurance products or services being
supervised. 35 Therefore, in principle the ICPs apply to the regulation and supervision of
MCCOs.

This section of the paper provides considerations and guidance for implementation ofvarious ICPs where the specific characteristics of the MCCO sector gives rise to a specificapproach from a perspective of proportionality. The ICPs describe the proportionality principle
by indicating that: “supervisory measures should be appropriate to attain the supervisoryobjectives of a jurisdiction and should not go beyond what is necessary to achieve thoseobjectives.” 36 The terms “nature, scale and complexity” subsequently provide the perspectives
for considering proportionality. The proportionality principle in the ICPs gives room to consider
specific characteristics of the MCCO sector. However, it should be kept in mind that theconsiderations leading to a proportionate application of a Principle or Standard should givedue consideration to the desired outcome of that Principle or Standard. Where specificapplication guidance is not provided in this section of this Application Paper, supervisors arestill expected to consider the principle of proportionality for the application of the ICPs to the
MCCO sector.
60.

In respect of MCCOs, types of member ownership roles, democracy, solidarity,
definition of common purpose, and profit / surplus retention, may give reason to tailor
regulatory arrangements and supervisory obligations. Some of the business practices,
processes and other characteristics in respect of MCCOs may call for specific treatment toachieve the desired outcome of a Principle or Standard.

61.

32 Paragraph 9 of the Introduction to the ICPs

33 Although ICP 23 may not be generally applicable to MCCOs, there is a view that the role of apex organisations

can give rise to some group related issues and ICP 23 could be considered as part of the treatment of sucharrangements.
34 Paragraph 6 of the Introduction to the ICPs
35 Paragraph 8 of the Introduction to the ICPs
36 Paragraph 8 of the Introduction to the ICPs

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62.
At the same time, the effectiveness of the mutual processes can reduce asorganisations grow in size or have more diverse membership. Many MCCOs go toconsiderable additional lengths to reinforce the effectiveness of mutual processes. However,once organisations become very large and diverse, it has to be recognised that it becomesincreasingly difficult to find material differences from the way share companies are run despite
efforts to maintain the mutual identity, and therefore those very large MCCOs should be
subject to the same requirements as shareholder companies. This may particularly be thecase when there is a significant number of policyholders who are not members or owners andtherefore have little or no say in the governance of the MCCO. It is important for supervisors
to understand the differences amongst MCCOs and that their supervisory approach reflects
such differences so that the same supervisory outcomes are met.

3.2 Formalisation and Licensing
LicensingRelevant Principles and Standards 37 - A legal entity engaging in insurance activities
must be licensed before it can operate in a jurisdiction. The insurance legislation should
contain, inter alia:
63.

•

a definition of regulated insurance activities subject to licensing;•a prohibition of unauthorised insurance activities;•

a definition of permissible legal forms of domestic insurers; and•an allocation of the responsibility for issuing licenses.

Scope of the Licensing Requirement – The nature of the insurance activities will in
principle determine whether a license is needed. When a MCCO is carrying insurance risk itshould in principle be considered an insurer and therefore subject to licensing. The MCCO
acting as insurance intermediary should also be subject to a form of licensing. 38 It is to be
expected that a legal entitlement by a customer to a (guaranteed) benefit based on an
insurance agreement should be a qualifying element of an insurance policy, requiring
protection by insurance regulation and by supervisory oversight. Therefore, arrangements
under which a claim is discussed by the legal entity without any legal entitlement tocompensation would not be considered an insurance contract although there is a membership
relationship between MCCO and members. 39
64.

The ICP guidance indicates that some “jurisdictions may decide to exclude some
activities from the definition of insurance activities subject to licensing. Any such activities
should be explicitly stated in the legislation. Jurisdictions may do this for various reasons, such
as:

65.

•

the insured sums do not exceed certain amounts;•

losses are compensated by payments in kind;•

activities are pursued following the idea of solidarity between policyholders (eg small
mutuals, cooperatives and other community-based organisations, especially in the caseof microinsurance); or•

the entities’ activities are limited to a certain geographical area, limited to a certain number
or class of policyholders and/or offer special types of cover such as products not offeredby licensed domestic insurance legal entities.”

37 ICP 4; Standard 4.1
38 Standard 18.2

39 See paragraph 34: the situation described under the second bullet would qualify as insurance.

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The Guidance adds that “given the principle that all entities engaged in insurance activities
must be licensed, the exclusion of limited insurance activities from licensing requirements
should give due regard to having appropriate alternative safeguards in place to protect
policyholders.” 40 This guidance should be interpreted restrictively and not be seen as an
exemption in general for the licensing and supervision of MCCOs. If small MCCOs are
excluded from insurance regulation and supervision – and hence considered informal - there
should be effective alternative safeguards which may be found in proven, vested social
structures and practices on which the MCCO is founded. Even if such alternative safeguards
can be considered to be in place, there is merit in establishing and keeping an overview of theinformal MCCOs activities and to encourage that these MCCOs choose the path offormalisation.
Exemptions for mutuals; the case of France and Poland:
In France, property and casualty and life mutuals regulated by the Insurance Code, andhealth and providence mutuals regulated by the Code de la Mutualité (Mutuality Code), 41
are authorised to conduct business for the same lines of business as stock insurers. Healthand Providence mutuals of the Code de la Mutualité can only be authorised for a limited
number of lines of business, which are related to the person (accident, sickness,
unemployment…). These mutuals cannot operate in motor insurance, household insurance
and others. (art.R.211-2 of code de la mutualité).
Mutuals under the ‘Code de l’Assurance’ (Insurance Code) 42 (art. L.322-26-3 and R.322125) can be exempted from licensing, provided they are fully reinsured with a “union ofmutuals”. By law, the sole activity of such union must consist in fully reinsuring the insurance
operations of the mutuals that are member of the union. Exemption is thus based, not on
the size of the mutual, but on whether or not the mutual is or not fully reinsured with suchspecific entity as a “union de mutuelles.” A similar exemption exists for mutuals under the
Code de la Mutualité. 43 See also Art.7 of the Solvency 2 Directive applicable to non-life
mutuals
In Poland a mutual undertaking with a small number of members and few or low number of
insurance contracts or an inconsiderable territorial range of activity can be recognised by
the supervision authority as a Small Mutual Insurance Undertaking (SMIU). SMIUs operate
on simplified rules. There are some “simplified” regulations relating to SMIU’s capitalrequirements (eg low share capital and optional guarantee fund).
Permissible Legal forms – The insurance supervision legislation will need to include
the legal forms admissible. This is normally done on the basis of a choice of the suitable legal
form for covering insurance risk which, with respect to the MCCO sector, is often vested incorporate legislation. The insurance supervision legislation will normally designate one ormore of the institutional forms mentioned in paragraph 41 such as mutual and friendly
societies. However, the national (insurance or corporate) laws may have restrictions on thelegal forms suitable to carry insurance risk even as a membership organisation. For example,
in the Netherlands, cooperatives are not eligible to underwrite insurance. For that purpose,
corporate legislation has designated the mutual society.
66.

Legal forms: the case of Tunisia
There are two forms of regulated mutual entities in Tunisia:

40 Guidance 4.1.1 and 4.1.2

41 http://codes.droit.org/cod/mutualite.pdf

42 http://codes.droit.org/cod/assurances.pdf

43 See also Art. 7 of the Solvency 2 Directive applicable to non-life mutuals

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•

Mutual insurance companies (“sociétés d’assurance à forme mutuelle”) which operate
similar to insurance (share) companies; and•Mutual societies or associations (“associations ou sociétés mutualistes”) which aregroups or associations that offer support to their members (and to their relatives) andcover of risks related to their lives (including health cover, retirement compensation,
disability and death).

Licensing Modalities – When deciding on the appropriate way of licensing a jurisdiction
should opt for a proportionate approach and may take into account the nature, scale andcomplexity of the insurance activities of MCCOs. For small MCCOs, jurisdictions may opt fora simplified administrative authorisation through a registration process for which basic
documentation such as Articles of Association, by-laws, a list of names of directors, a simple
balance sheet and Profit & Loss (P&L) account or opening balance sheet, and policy
conditions are submitted. After registration, the supervisor may limit its activities to a light touchoversight based on basic financial returns. This modality of licensing may be arranged for
MCCOs with limited activities in terms of the number of policyholders, premiums volume, typeof insurance risk (for example limited to agricultural insurance) or geographical scope (or acombination of these factors). Limitations or special conditions may be set in respect of theactivities of such smaller MCCOs to control prudential and conduct of business risks. Theselimitations and conditions may bring these risks to a level that would allow limited oversightinstead of full supervision. For example, certain lines of business such as life insurance and/or
liability insurance may be prohibited. Also, conditions may be used to arrange that the articles
of association or by-laws enable the board to ask members for additional contributions or use
members’ account for solvency purposes. These limitations and conditions may be imposed
either by legislation or as conditions connected to a decree granting exemption from fulllicensing and supervision.
67.

68.
For bigger MCCOs that in terms of the size of the business and risk profile arecomparable with commercial insurers, following the same licensing processes as required ofsuch commercial insurers may be appropriate. For any modality of licensing, the legislation
should clearly state the applicability, requirements and process for registration. 44

Type of license / registration and any exemptions from supervision
Morocco: There is no license but charters of mutuals must be approved by joint order of the
Minister of Economy and Finance and the Minister of Employment and Social Affairs.
South Africa: A friendly society registered with long-term policies with (i) the value of thepolicy benefits, other than an annuity, to be provided or (ii) the amount of the premium inreturn for which an annuity is to be provided, does not exceed R7,500 (approx. US$ 500)
per member is not required to be a registered insurer.
Licensing Authority – The licensing authority could be the supervisor for thecommercial insurers. Sometimes, for MCCOs, a special government department or publicauthority other than the regular insurance supervisor is assigned with the registration of
MCCOs. In some jurisdictions, registration may even be limited to incorporation andregistration with the Chamber of Commerce. To ensure appropriate policyholder protection, it
is important that when assigning the licensing and supervisory authority that due regard should
be given to whether or not the authority has the proper capacity and expertise for oversight ofan insurance entity, and an understanding of the dynamics of insurance markets. It should
also be able to carry out all responsibilities regarding supervisory review and analysis (bothon-site inspections and off-site monitoring) of the MCCO. It should have adequate powers for
effective supervisory interventions when and where needed. If the supervisor for MCCOs is a
69.

44 Standard 4.1.3

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separate authority from the supervisor for conventional insurers, proper information exchange
and cooperation mechanisms are essential. These could be vested in legislation or arranged
through a memorandum of understanding.
Formalisation
The Application Paper on Regulation and Supervision supporting Inclusive InsuranceMarkets states that “given the overall objective that informal insurance is undesirable, theexistence of an informal sector may need to be formalised to give effect to this objective” andthat “everyone should be offered the opportunity to be part of the formal financial system.” 45
70.

71.
Providers of insurance services should be included under the supervisory regime
rather than excluded. Efforts to reform the regime to include MCCOs within this regime areimportant so all policyholders should be accorded the benefits of prudential and conduct ofbusiness supervision.
72.
Paragraph 2.2 onwards of the Application Paper on Regulation and Supervision
supporting Inclusive Insurance Markets provides application guidance on the process offormalising the informal sector and managing transitional arrangements. In this respect it isrelevant to note that:•

Transitional arrangements may be necessary to allow informal insurance to migrate toa regulated environment. They may also be relevant when regulatory arrangements
anticipate that insurers will form and build capacity over time, or when pilots are
conducted; 46•

When seeking to formalise an informal sector, a clear and transparent pathway should
be provided. As a first step, all informal entities providing insurance services should,
at least, be registered through a process that is clear and transparent (see Guidance
4.1.6) and meet minimum requirements; 47•

Once registered, entities should operate a restricted business model reflecting theextent to which their business is lower risk, smaller, and less complex. Conditional
licenses could be used (as envisaged under Standard 4.7); 48•

Accepting (imposing) restricted business models with commensurate recognition of the
impact on the nature, scale and complexity of the risk should be implemented toencourage the path to a more formal status; 49•

Supervisors need to avoid approaches that are inconsistent and could lead toregulatory arbitrage. This challenge can arise with transitional arrangements, or
specially tailored regulation. In such instances, attention is needed to ensure thatperverse incentives are not created and differentiation is limited only by the naturescale and complexity of the risk. 50

73.
When a process of formalisation is started, the supervisor is often confronted with asignificant segment of the market that is not yet registered and is therefore difficult to reach.
This is especially pertinent in the MCCO sector which could consist of numerous small-size
providers that are geographically spread and unaware of pending regulatory changes. Also,
the financial and other conditions of individual informal insurance providers are likely to be
unknown to the supervisor. This will create a challenge in understanding the impact of
45 Paragraph 2.22 resp. paragraph 2.5 Application Paper on Regulation and Supervision supporting Inclusive
Insurance Markets
46 Paragraph 2.22 Application Paper on Regulation and Supervision supporting Inclusive Insurance Markets
47 Paragraph 2.23 Application Paper on Regulation and Supervision supporting Inclusive Insurance Markets
48 Paragraph 2.24 Application Paper on Regulation and Supervision supporting Inclusive Insurance Markets
49 Paragraph 2.25 Application Paper on Regulation and Supervision supporting Inclusive Insurance Markets
50 Paragraph 2.30 Application Paper on Regulation and Supervision supporting Inclusive Insurance Markets

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imposing (new) regulations to this market segment and will have consequences in terms ofsupervisory capacity to manage transitional processes.
74.
Therefore, when managing a process of formalisation, the supervisor could consider
the following steps:

1. identification of the insurance providers involved;
2. understanding the financial, organisational and other conditions of the providers
involved as a basis for the design of a proportionate regulatory regime and an
appropriate transitional approach;
3. effective outreach and communication with the insurance providers involved.
Identification of informal MCCOs – Without knowledge of the identity of the insurance
providers that will be regulated it is impossible to communicate directly with them to explain
the required measures and to manage the formalisation process. The supervisor may need tobe creative in establishing a list or (tentative) register of (potential) providers that need to beformalised and supervised in the future. As it might not be clear immediately whether an entity
will be considered an insurer according to the insurance regulation the list may have apreliminary nature and used to ascertain at a later stage which entities are indeed to beconsidered an insurer.
75.

76.

Such a list or register could be established on the basis of data from:•The Chamber of Commerce. If MCCOs are recognised as a legal entity, they are likely tobe registered with the Chamber of Commerce as could be expected with cooperatives andmutuals;•

Other public records or records from public authorities like revenue and tax authorities;•

Membership registers from trade associations. This could be the insurance association or
associations for cooperatives or mutuals;•

Other private sources such as client details of telephone or internet providers;•Private research institutions specialised in searches for marketing and other purposes;
and•Tipping-off – information provided by customers for example provided on special
information lines.

To get access to these sources, the supervisor may need to verify whether the provision of
the data is legally permissible. If not, a special legal arrangement – possibly as part of thetransition arrangements – could be considered. The collection by and transfer of informationfrom these institutions may require payment of a fee or reimbursement of expenses. The
supervisor will need to discuss the logistics with the institutions.
Understanding the financial, organisational and other conditions – Once the identity
and contact details of the potential insurance providers have been established the supervisor
may need to contact the individual entities. The supervisor would first of all need to explain
the rationale for the initiative to contact the entity and also explain the basics of the (future)
regulations. This would help to persuade the entities to cooperate in the transition process,more so as they might at that stage not be required to cooperate and provide information aslong as their formal status as insurance provider has not been legally established. For that
purpose it is advisable to obtain the cooperation of any trade association that can assist or
mediate in establishing a good rapport with its members and possibly help in collecting thedata required.
77.

78.
Once a contact has been established the supervisor can ask for information - such as
the following that will allow them to understand the “business” of the entity:
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•

The characteristics of the products and services offered to the members and theoperational and other processes used;•

The financial position of the entity including assets, liabilities and investment policy;•

The nature of the organisational set-up, governance and relationships with members.

The supervisor can also request the information from auditing and actuarial firms.
To collect this information the supervisor may want to ask for basic financial and otherdata such as an annual report, balance sheet, P&L account and auditors report. It could also
send out a questionnaire with specific questions to either the entity or – if possible andavailable – the entity’s accountant or actuary. Another option is to complement the information
by doing quick scans through on-site visits.
79.

80.
This information will serve multiple purposes which are interrelated. Firstly, insightknowledge based on this information will provide an impression as to how the (envisaged)
regulation will impact the entity. It will, for example, provide an indication if and how many
entities will be able to meet the future financial requirements. As new regulations might raisebusiness expenses for the entities and challenge their sustainability, regulations may prompt
a trend towards an exit from the market or concentration into bigger entities through mergers
and portfolio transfers. If a supervisor has a proper understanding of these aspects it can(more optimally):•

Make arrangements so that the future regulations give due regard to these conditions
which could mean setting the boundaries for tiered licensing and light-touch oversight;•

Consider transitional measures which could mean establishing grandfather clauses 51 in
regulation or grace periods 52 for compliance to allow accommodation with the newrequirements;•

Prepare the organisation and staff of the supervisor for the process of formalisation which
could mean arranging specific training for staff and make arrangements to assist in
expeditious licensing processes, merger of entities or winding-up of entities.

Any deliberation on such policies and measures should be based on the optimal protection ofpolicyholders.
Effective outreach and communication – As already explained in the previous
paragraphs, it is important to inform the (potential) insurance providers well in advance of thepending changes to the regulations. This would allow them to prepare for any changes andprovide the supervisor with the information on the financial, organisational and other states ofaffairs to consider specific policies and measures. Although a good rapport is helpful for thispurpose, the supervisor may encounter resistance and opposition from the entities. They may
have fundamental objections to becoming regulated and supervised, in particular if itjeopardises their existence. Some may be unaware that they are actually offering services totheir members that can be regarded as insurance; for example, if they do not use theconventional insurance terms (contract instead of policy or contribution instead of premium).
It is important that the supervisor tries to convince the insurance providers to cooperate. Often
trade associations can be helpful to achieve this.
81.

51 A clause exempting certain existing insurance providers from certain legal requirements.

52 A period granted to allow compliance with regulations

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Growing an inclusive market and responding to informality: the case of thePhilippines 53
In the Philippines, mutual benefit associations (MBAs) are recognised in the insurance law
since 1974. Since 2006, a special regulatory dispensation created the Microinsurance
MBAs, requiring a minimum of 5,000 members, reduced operations (only life), and a lower
guarantee fund that can be built over time.
The 2010 microinsurance regulatory framework saw further measures to address
informality in the microinsurance space. An important component has been interagency
cooperation between the Insurance Commission, the Cooperative Development Authority
and the Central Bank. Thus, where cooperatives are concerned, it was recognised that theauthority with functional oversight over insurance provision, the Insurance Commission,needs to work together closely with the authority overseeing cooperatives from an
institutional point of view.
The current regulatory framework allows MCCOs four options for formalisation:
1.
2.
3.
4.

by obtaining a group policy from a commercial or cooperative insurers;
by becoming an agent for a commercial or cooperative insurers;
by establishing a new Micro insurance - MBA or by joining an existing
microinsurance-MBA; orby applying for a commercial or cooperative license, in which case a reduced
capital adequacy ratio applies if at least 50% of the business is in microinsurance.
The representatives of the Insurance Commission Philippines emphasised that theprocess in the Philippines has taken several years, and is still ongoing.

There are two cooperative insurers with a significant number of low-income clients andlinks to primary cooperatives. Also, the MI-MBAs have been a prominent driving force formicroinsurance, showing commercial insurers the potential of microinsurance. In
particular, CARD MBA, the first to be licensed in 2001, fulfilled an important role as a“franchise model” for nascent MI-MBAs. The technical assistance arm formed under its
auspices, RIMANSI, continues to play a strong apex and backstopping role. Today, 21
microinsurance MBAs cater for approximately three million policyholders and their family
members, holding more than 60% of the life market in terms of the number ofmicroinsured. MI-MBAs saw 32% growth between 2012 and 2013.
Challenges remain including how to sustain the current high levels of growth, how to
expand the role of MCCOs (which is currently confined to life business) into the non-life
market with the remaining informality of cooperatives still running self-insurance schemes.
The government started to reengage on the formalisation topic in 2015. Focusing on inhouse insurance schemes of cooperatives.

Steps towards formalisation
Jamaica: Since 1971, all insurance companies had to be registered. The FSC monitors themarket and where it is found that an unregistered entity is operating in the market, thecompany is given the opportunity to register. If the entity refuses to register, the entity isreferred to the Director of Public Prosecution since it is a criminal offence to operate

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insurance without registration. The Insurance Act and the attendant regulations are set out
the registration requirements.
New Zealand: the Bank identified a number of insurers with significant shortcomings insome licensing requirements, such as inadequate capital, shortcomings in their fit-andproper policies for directors and “relevant officers”, and inadequate governance. The
Bank’s approach in regard to these insurers was to require evidence of a realistic plan toaddress shortcomings within specified timeframes, or to show how they would cease
carrying on insurance business in New Zealand and exit the sector. Whilst the Bank was
not able to enforce the Act’s powers on un-licensed insurers, the licensing requirements
provided a threshold that crystallised the “continue or exit decision” by requiring insurers
to get up to speed and comply, or to make the decision to exit.

3.3 Corporate GovernanceRelevant Principles and Standards - Corporate governance refers to the set of
relationships between an insurer's board, senior management, customers and otherstakeholders; and a structure through which the objectives of the insurer are set, and themeans of attaining those objectives and monitoring performance are determined. The
supervisor requires insurers to establish and implement a corporate governance framework
which provides for sound and prudent management and oversight of the insurer’s business aswell as adequately recognising and protecting the interests of policyholders. 54 Accordingly, thecorporate governance framework of an insurer:
82.

•

promotes the development, implementation and effective oversight of policies that clearly
define and support the objectives of the insurer;•

defines the roles and responsibilities of persons accountable for the management andoversight of an insurer by clarifying who possesses legal duties and powers to act onbehalf of the insurer and under which circumstances;•sets requirements relating to how decisions and actions are taken including documentationof significant or material decisions, along with their rationale;•provides for communicating, as appropriate, matters relating to the management, conductand oversight of the insurer to stakeholders; and•provides for corrective actions to be taken for non-compliance or weak oversight, controls
or management. 55

The subject of corporate governance is closely related to the issue of agency, whichrefers to the concerns of alignment of the interests of the managers of an organisation withthose of the principals / owners of that organisation that result from a split between ownershipand management. Governance of MCCOs is different from that of conventional insurers
formed as share companies. 56 In MCCOs the insurer is collectively owned (and/or controlled)
by policyholders, which affects the possible divergence of interests.
83.

The approach to corporate governance requirements should take into account thenature of MCCOs including the democratic processes where these are robust. As a result, thisparticular aspect of insurance regulation can offer both opportunities and carefully consider abalance of obligations on MCCOs. As is envisaged in the ICPs, it may be useful to consider
separately defined rules for corporate governance for MCCOs that are both facilitative ofaccess and reflect the nature of the mutuality.

84.

54 ICP 7

55 Guidance 7.0.1
56 Guidance 7.0.6

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Board and General Meeting of Members
The effective functioning of the board remains a key objective of supervisory oversightand should be subject to the same overall review by supervisors. The manner that supervisors
and MCCOs achieve this objective may, however, take account of the structure of the MCCOs.

85.

86.
When reviewing the set-up and functioning of the governance framework of an MCCO
the supervisor may give due regard to the following aspects:•

The corporate structure of the MCCO;•

The size of the organisation and effectiveness of democratic processes in the MCCO;•

Appointing powers;•

Attribution of decision-making;•Control issues;•

Suitability issues.

The corporate structure – In accordance with the jurisdiction’s corporate law, the
MCCO could have various structures that will affect the assignment of roles, responsibilities
and accountabilities and therefore the effectiveness of the governance framework. As
indicated above the policyholders are considered the owners of the MCCO. Generally, under
corporate law they are often considered the members of the association (cooperatives,
mutuals). They constitute the general meeting of members that is empowered to take theimportant decisions within the limits of the law and articles of associations or by-laws. The
board has ultimate responsibility for setting and overseeing the implementation of the insurer’sbusiness objectives and strategies for achieving those objectives, in line with the insurer’s
long-term interests and viability 57.
87.

88.
MCCOs could have a two-tier system in which next to the board a supervisory board
is established. 58 The supervisory board will have no executive responsibilities but is assignedwith the oversight of the MCCO. While the members of the board are (in principle) appointed
by the members, this might not be the case for a supervisory board. A system of co-optation
may be applied on the basis of which the supervisory board could appoint its own members.
This could help to assure its independence from the board whose activities it is overseeing.
The supervisory board will report to the general meeting.

Besides a board, the MCCO will have senior-management – sometimes called
directors or administrators – who are responsible for the daily operations under the oversightand steering of the board. 59 For small MCCOs senior-management may consist of only one
or two directors which may prompt the need for special internal control measures (see below).
89.

As members of an MCCO may not all be able and willing to actively participate in the
democratic processes, subject to legal provisions in corporate law, MCCOs may establish acouncil of members’ representatives (members’ council). The council members are elected by
the policyholders / members. The council typically has some of the powers normally attributed
to the general meeting. A members’ council could be an effective way to enhance thedemocratic functioning of an MCCO.
90.

Size of the organisation and effectiveness of democratic processes – the democratic
processes in an MCCO are likely to work well in smaller size organisations set up as an
initiative of specific coherent groups, for example, farmers or fishermen. Their interest in thepooling of a specific risk closely related to their income and livelihood as well as the personal
contacts between the people involved in the MCCO may provide an impetus for democratic
91.

57 Standard 7.2

58 Guidance 7.0.3
59 Standard 7.10

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involvement. As organisations grow and management responsibilities are assigned toprofessionals, these processes may become more challenged. Groups of members may not
all share the same interests or have organised themselves as a group which affects thecountervailing power vis-à-vis the board and senior management. Sometimes mutuals andcooperatives are governed in a way similar to share companies with the general meeting being
more a formality. In those cases, a members’ council may be a helpful way of improving the
democratic nature of the MCCO. From a supervisory perspective the supervisor should beaware that democratic processes might not always be functioning adequately which might
negatively affect the governance of the MCCO. Similarly, the supervisor should give adequate
attention to the interest and position of any policyholders who are not a member of the MCCO
and - as is the case with share companies – need adequate protection.
Appointing powers – The power to appoint the members of the board will in principle
be assigned to the general meeting of members. When reviewing the governance frameworkof an MCCO, the supervisor should be aware that their jurisdiction’s corporate law may allow
for exceptions. Sometimes the by-laws may entitle non-members to appoint one or moremembers of the board. However, it would seem to be against the nature of mutuality if amajority of members of the board would be appointed by non-members. If this neverthelessoccurs in practice, it may create a legal dispute between members and the MCCO as a legal
entity.
92.

93.
On the subject of election of members of the board, consideration should be given to
the background of the candidates. Traditionally, and very often for small size MCCOs themembers will elect the board from among the members themselves. Another possibility is thatmembers need to elect the board from a list of candidates put together by the board itself orby others. Sometimes this list is even binding and no other candidates will be allowed to enter
the election process. The supervisor needs to be mindful that - in particular if the election
process is not based on corporate law - this might create legal or other disputes that may
negatively affect the governance of the MCCO, for example if legal injunctions paralyse thedecision-making ability of the MCCO. The background of board members is also importantfrom a perspective of suitability or fitness and propriety (see paragraph 99). If the by-laws ofan MCCO allow the appointment of a non-member as board member this would create thepossibility of enhancing specific expertise. Alternatively, the by-laws may have provisions on
the board being allowed to hire and be advised by external experts.
94.
Typically, the by-laws of an MCCO based on corporate law will contain a fixed term forappointment as member of a board. Additional provisions may exist on re-election. This may
pose challenges as to the continuity of the business of the MCCO, in particular if members
are assigned to specific areas of attention, for example financial markets, or are member of acommittee, like an audit committee. Supervisors should be mindful of such continuity issues.

Attribution of decision-making – There may be differences between MCCOs in respectof the types of decisions that are within the purview of the general meeting of members on the
one hand and of the board on the other hand. Typically, the general meeting will have the rightto decide on a change to the by-laws, approval of the annual report and winding-up of theMCCO. It is important to acknowledge this because it determines who is entitled to take certain
decisions for example, in emergency situations in which expeditious measures are needed
such as a transfer of a portfolio or increase of the premium. If a supervisor needs to intervene
the procedures involving the approval of members or the general meeting as such issomething that needs to be considered.
95.

Corporate governance requirements
France: Specific corporate rules for the mutuals of the Code de la Mutualité where, inparticular, a) the General Meeting plays a major role, b) One of the effective managers is
automatically the Chair of the board meeting.
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Morocco: Mutuals are managed by a board whose members are elected by the General
Meeting, which sets the strategic directions and takes important decisions according to thestatutory provisions. The General Meeting is composed of members of the mutual or theirdelegates.
Poland: The management board of a domestic insurance undertaking, with the exclusion ofmutual undertaking, shall consist of at least two members. Persons contributing to the sharecapital may be members of the mutual undertaking’s management board or the mutual
undertaking’s supervisory board, to the extent specified in the articles of association.
United Kingdom: In the UK, in response to concerns about standards of corporate
governance in some mutuals in the 1990s, the mutual insurance sector developed a selfregulated code of governance, UK Corporate Governance Code, Annotated for Mutual
Insurers. The Code has now been in place for nine years, and each year members of the
Association of Financial Mutuals undertake a detailed compliance exercise, the results ofwhich are published by the trade body.
Finland: In Finland mutuals have supervisory boards as important bodies and instrumentsof owners steering of the company. Public limited companies don’t usually have supervisoryboards when there is a Board consisting of non-executive members. The ownerpolicyholders have a right to participate and vote in the general meeting, which appoints
the members of the supervisory board. The aim is that the assembling of the supervisoryboard reflects the collective of owner-policyholder (geographically, customer segmentsetc.). The supervisory board appoints the Board. In addition, there are certain advisoryboards, which are not legal bodies of the company but more like a channel ofcommunication between company and its owner-policyholders. 60
Sweden: There are different ways to ensure an adequate influence for members. The
situation in every specific mutual has to be taken into account to ensure that members’
influence is guaranteed. In a large mutual with several million members the members canelect delegates to represent them at the General Meeting and exercise the voting rights,
and the right to speak and make proposals. The election can be either direct or indirect via
organisations that represents the members, or a combination of these methods. The
number of delegates that are elected directly or indirectly by representative organisations
can vary between mutuals to reflect the composition of members in the specific mutual. The
delegate must be a member (policyholder) in the mutual and cannot be a board member,or employed by the mutual. The delegates are elected for one year at a time. 61
Control issues – Supervisory approval is required for proposals to acquire significant
ownership or an interest in an insurer that results in that person (legal or natural), directly or
indirectly, alone or with an associate, exercising control over the insurer. 62 Control is typically
exercised through possession of shares and will relate to voting rights and in particular theright to appoint members to the board. Jurisdictional legislation will need to indicate whencontrol is significant for which a threshold will be provided, for example 25% or higher of thenumber of shares or voting rights in the General Meeting. As in principle MCCOs do not haveshare capital nor do members individually have a dominating vote in the General Meeting theprovisions on approval of qualified holdings are not likely to be relevant. However, exceptions
may exist. For example in the Netherlands, some mutuals are allowed to have guarantee
capital divided in shares comparable to those of share companies. Therefore, similar hybrid
companies might exist depending on corporate law.
96.

Although the supervisor may not be in a position to formally approve the acquisition ofsignificant control in an MCCO, - and as part of that approval process check the suitability of

97.

60 Source: ICMIF
61 Source: ICMIF
62 ICP 6

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the prospective significant owners - the need remains to monitor the control aspects of theMCCO. As part of checks on suitability, significant owners may need to be able to supply
additional capital to support the solvency of the insurer. Such a facility might very well be
missing in an MCCO, which prompts the need for alternative financial support measures (seesection 3.4 on Capital Requirements and Capital Resources).
Requirements / practices in respect of legal or natural persons with a significant
ownership / control in the insurer)
Mexico: The mutual insurance companies cannot be controlled by foreign persons or
foreign financial institutions.
Tunisia: For mutual societies: there are no such control requirements or practices formutuals.
Turkey: Control requirements are in line with those of share companies. However, there isa special limit for each shareholder in the Cooperative Law. Each shareholder is to haveat least one share (at a value of 100 Turkish Liras) and a shareholder could have amaximum of 5000 shares according to the Cooperative Law.
98.
One issue relating to effective governance, and also related to changes of control, isthe risk of control of a mutual entity being secured by an external party when the democratic
processes are less strong. MCCO structures may be more vulnerable to such interventions as
the cost of taking control can be lower than would be the case if a direct purchase of equity isrequired. This can provide an attractive target for asset stripping activities or other frauds. As
a result, care is needed to ensure such actions can be subject to effective supervisory
oversight and, if necessary, intervention.

Suitability issues - The supervisor requires board members, senior management, key
persons in control functions and significant owners of an insurer to be and remain suitable tofulfil their respective roles. 63 For MCCOs the persons that are likely to be assessed, or to be
subject to suitability testing, are the members of the board and senior management. 64 For
MCCOs, the democratic principles imply the members of the board are selected, andrepresentative of, the policyholder / member body. As a result, members of the board usually
have a stronger link and obligation to policyholders and may be less subject to types ofconflicts of interest between those of shareholders and policyholders. To this extent, such
issues could be less of a supervisory concern provided the democratic process works
effectively.
99.

100.
When a board is constituted largely of elected representatives there is a risk that theboard does not encompass the same diversity of experience that a more ‘selected’ board may
arrange. When the democratic process is a key support of governance, there may be a needto ensure the availability of appropriate expertise and diversity of commercial or insurance
experience, otherwise the board may not be collectively suitable in terms of the competencies
required. For example, a MCCO based on membership of a particular profession or industry
may not automatically draw a board with experience in commercial and insurance related
matters.

Surveys indicate many MCCOs are very conscious of this issue and they provide
regular training for new directors on an ongoing basis, although it may not always be easy toaccess such training without significant effort. Some MCCOs also indicated their boards are
only constituted by members elected and not by any members who also hold management
responsibilities and as such are “wholly independent.” In addition, there is access to the board
to independent experts at the board’s own initiative; the ability of individual directors to initiate
investigations or to secure advice; or very robust processes whereby directors can obtain101.

63 ICP 5

64 See the previous paragraphs on significant owners / qualified controls

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access to management to inquire and understand issues – all of which can enhance theiroversight role and help the directors in carrying out the responsibilities expected of them. In
some jurisdictions, MCCOs are obliged to, or will spontaneously adopt the practice of havingsome appointed independent directors who bring particular expertise to the board. In others,
MCCOs may have access to technical service providers as a cost effective way to build andmaintain expertise.
102.
For supervisors it is important – while being mindful of the democratic principles
applying to MCCOs – to recognise the knowledge and expertise required and available in a
specific MCCO. When doing so, the risk profile of the specific MCCO needs to be considered.
For example, if investments are limited to deposits with regulated banks than in-depth
knowledge of financial markets may not be necessary. The same applies to actuarial expertise
if the products are limited to household insurance. Those MCCOs specialised in a specific lineof business - such as agricultural insurance, funeral insurance or health insurance - will benefit
from having senior management with expert knowledge in that specific area. For example, an
MCCO insuring livestock could appoint a director with experience as veterinarian. Alternative
measures could be considered to enhance expertise for example by hiring experts. However,a certain minimum level of knowledge needs to be present at the level of senior management
and the board.

Supervisors should be mindful that provisions in supervisory legislation concerningsuitability requirements and prior approval by the supervisor of appointments of members tothe board and senior management may be perceived to be conflicting with the democratic
principles of electing board members. It will in particular become pertinent if a supervisor
opposes an appointment or disqualifies an appointed board member or senior manager.
MCCOs may see this as an infringement of their democratic rights. Supervisors need to beclear on the legal situation in their jurisdictions certainly in sensitive areas involving the privacyof individuals.
103.

Suitability of board members and key functions (fit and proper requirements andvetting practices)
Morocco: There is no specific requirement in order to be a board member but the court mayorder the temporary or permanent incapacity to participate in the administration or
management of a mutual in case of violation of the law.
Tunisia: For mutual societies, there are no specific rules for board members and key
functions now, but according to the draft of the code of mutuals, board members and key
functions will be regarded the same way as in insurance companies.

Risk Management and Internal Controls
The supervisor requires an insurer to have, as part of its overall corporate governanceframework, effective systems of risk management and internal controls, including effectivefunctions for risk management, compliance, actuarial matters and internal audit. 65 This is asubject requiring a proportionate approach with due regard to the nature, scale and complexityof the MCCO sector in combination with the desired outcome of the Principle or Standard at
hand.

104.

If the business of the MCCO is limited, for example, in terms of number of policies,
nature of the product, size of assets and investments or number of staff then the design andset-up of the risk management system could be commensurate. Small organisations may notneed internal control processes of a complicated nature involving multiple functionaries in theorganisation. For example, where the office is run by one director and one administrative
105.

65 ICP 8

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member of staff – the direct visual oversight by the director becomes an important control
measure, though in such circumstances there is a need to ensure that the Board is capable ofeffective challenge.
106.
The supervisor requires the insurer to have effective control functions with thenecessary authority, independence, and resources. 66 The ICPs require the following control
functions to be in place and operating effectively: risk management function, compliancefunction, actuarial function and internal audit function. 67 It might be a challenge for small
MCCOs to assign these functions to (separate) individuals within its organisation. Whenconsidering whether an MCCO is complying with supervisory requirements in this respect itshould be noted that the relevant Standards speak in terms of functions rather than persons.
This means that MCCOs are expected to vest or accommodate the functionality rather thanhaving a separate individual appointed as compliance office, risk manager, etc. This would
leave some room for combining these functions. However, it would not be appropriate tocombine in one person functions of an oversight nature with functions of an operational nature
or administrative nature. Possibly alternatives could be found by hiring external experts suchas actuaries or - if possible – arranging support at group or federation level. For that purposean adequate service level agreement would be needed. In addition, if functions areoutsourced, the Board and Senior Management should still maintain adequate control andoversight of these outsourced functions.

Risk management and internal controls requirements
Morocco: Internal controls are not mandatory but some rules exist. As far as risk
management is concerned, the law requires separate management of each risk covered
with distinct accounting and separate accounts. Concerning the actuarial function, actuarialstudies are required when creating a mutual or when changing the amount of contributions(premiums) or benefits.
Tunisia: For mutual societies: according to the draft of the code of mutuals they will be
regarded the same as other insurance companies. Mainly the requirements are to appointan actuary, an external auditor and their responsibilities, as well as specifying the
responsibility of the managing director and the board of directors.
Turkey: Same requirements, however their scale is taken into account during the on-site
inspections like other share companies.

3.4 Capital Requirements and Capital Resources
Relevant Principles and Standards - The supervisor establishes capital adequacy
requirements for solvency purposes so that insurers can absorb significant unforeseen losses
and for providing degrees of supervisory intervention. 68 More specifically the ICPs require thesupervisor to:107.

•

Establish regulatory capital requirements at a sufficient level so that, in adversity, aninsurer’s obligations to policyholders will continue to be met as they fall due and requirethat insurers maintain capital resources to meet the regulatory capital requirements; 69

66 Refers to properly authorised functions, whether in the form of a person, unit or department, serving a control
or checks and balances function from a governance standpoint and which carry out specific activities including
risk management, compliance, actuarial matters, and internal audit.
67 Standards 8.4, 8.5, 8.6 and 8.7 respectively.
68 ICP 17
69 Standard 17.2

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•Include solvency control levels in these capital requirements which trigger different
degrees of intervention by the supervisor; 70•

Define a Prescribed Capital Requirement (PCR) which is a solvency control level above
which the supervisor does not intervene on capital adequacy grounds as well as Minimum
Capital Requirement (MCR) which is a solvency control level at which, if breached, thesupervisor would invoke its strongest actions and which is subject to a minimum boundbelow which no insurer is regarded to be viable to operate effectively; 71•

Define the approach to determining the capital resources eligible to meet regulatory capitalrequirements and their value; consistent with a total balance sheet approach for solvency
assessment and having regard to the quality and suitability of capital elements; 72•

Establish criteria for assessing the quality and suitability of capital resources, having
regard to their ability to absorb losses on both a going-concern and wind-up basis. 73

108.
MCCO-specific features - Capital requirements for a MCCO may require specificconsideration. The financing of the business / activities by MCCOs is different from that of
traditional share companies as is indicated in paragraph 8. Where in the case of an insurer asa share company the risk is transferred from insured to insurer; a MCCO is essentially a risksharing mechanism between members. The contributions by the members are used to cover
the expenses such as claims made by members, the funding of provisions and the financing
of various operating costs. If the financial results of the MCCO show a deficit the members
may – in accordance with the provisions in the by-laws - be called to make supplementary
payments (member call). Alternatively, the MCCO may decide to reduce the indemnification
to meet the available budget. This latter practice should have an adequate legal basis, forexample, vested in the by-laws or any other legal document with which the member has
agreed. The extent to which an (additional) premium is charged, or a surplus is returned canbe based on various factors for example, proportionate to the advance premium paid. The bylaws will typically determine the method to be applied.

Another possible feature of an MCCO is the paid-in subordinate member’s account.
Any surplus returned to the member may be added to an account held by the MCCO in thename of the member / policyholder. The funds in this account would not be available to themember until the winding-up of the MCCO or possibly at the end of his/her membership of theMCCO. This option would allow the MCCO to keep the funds in the entity and to draw upon it
if needed for solvency or financing purposes in accordance with supervisory legislation,
corporate law and/or the by-laws. On the other hand member’s accounts may pose challenges
to the MCCO and the supervisor in the case of a demutualisation (see hereafter) or transferof portfolio if members question any use of the funds in these accounts.

109.

Capital requirements for MCCOs - Within the framework of the ICPs mentioned above
the supervisor should consider how to accommodate, if appropriate, these specific features of
MCCOs in its design and application of capital requirements. The ICPs do allow for suchvariations; however, any variations to the regulatory capital requirement imposed by thesupervisor are made within a transparent framework, are appropriate to the nature, scale andcomplexity according to the target criteria and are only expected to be required in limited
circumstances 74.
110.

In the calculation of the required solvency, no specific requirements exclusively for
MCCOs may be needed. However supervisors may choose to establish a tiered system oflicensing and supervision for small size companies with lower threshold solvency
requirements (PCR and MCR) or requirements based on a simplified method of calculation for111.

70 Standard 17.3
71 Standard 17.4

72 Standard 17.10
73 Standard 17.11
74 Standard 17.9

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example, the size of the provisions, premium-income or incurred losses over past years. As ajustification for such special treatment the fact that MCCOs use a system of collecting
contributions as described above, can be taken into consideration in particular for small-size
MCCOs in which solidarity is well vested.
112.
This is also recognised in the Application Paper on Regulation and Supervision
supporting Inclusive Insurance Markets where it states: “When seeking to enhance access toinclusive insurance markets, the absolute minimum bound for the Minimum Capital
Requirement (MCR) may be revised to a lower level reflecting a lower risk profile and more
limited need for detailed governance and risk management. This allows a wider range ofentities to participate in the provision of insurance services.” 75 It is up to the supervisor
introducing lower threshold solvency requirements to consider whether it wants to set a
different MCR and PCR, or if both would be at the same level.
113.
The lower levels of capital required as mentioned in the previous paragraph could belinked to the tiered system of licensing allowing for lighter-touch oversight of MCCOs with alower risk profile as mentioned in paragraph 67. In this respect, it should be mentioned thatcertain small-size mutuals in the European Union are either exempt from the solvency
framework, Solvency 2, or subject to a “Solvency 2 light” regime which can be regarded as aproportionate approach to solvency requirements.

Required capital
Australia: Some of the existing friendly societies have been granted relief from having tomeet the minimum Aus. $10 million capital requirements required of other life insurers.
China: In early 2015 CIRC issued a trial regulatory scheme for mutual insuranceorganizations. The scheme sets out certain requirements for applying for a mutual
insurance company license, including requirements as to minimum start-up capital. Thoserequirements are CNY 100 million with a minimum of 500 members for General mutual
insurance companies and CNY 10 million with a minimum of 100 members for Professional
and Regional mutual insurance companies.
France: Solvency 2 floors do not apply to mutuals under the code de la mutualité that areentitled to ask members for additional contributions.
Mexico: The regulations do not establish solvency capital requirements for mutual
insurance companies.
Uganda: Mutuals have the following capital Requirements = Assets of company + 15% *(Assets – Liabilities).
Morocco: There are no capital requirements, but technical provisions are provided as well
as allocation rules and investment surpluses. No mutual is exempted from its requirements.
Philippines: Required Capital for MBAs and Cooperatives are different and much less thanregular insurance companies. MBAs: No required capitalisation but an initial guarantee
fund of Php5 million (US$ 108,000) deposited with the Insurance Commission (IC) is
required. The IC may require this fund to be increased up to the capital investment of an
existing domestic insurance company (Section 405 Insurance Code). For Cooperatives:
capitalisation is 50% that of regular insurance companies. For Mutual Insurancecompanies: the same paid-up capital as regular insurance companies.
Tunisia: A-For mutual insurance companies: Different capital resources. The minimum
capital for insurance companies is 3 million TND (about 1.5 million US$) if licensed for asingle branch and 10 million TND (about 5 million US$) in the case of multi-branch licenses.

75 Section 3.17 of the Application Paper on Regulation and Supervision supporting Inclusive Insurance Markets

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For mutual insurance companies the minimum social fund is 1,5 million TND (about
750,000 US$).
Capital Resources - In respect of capital resources, the supervisor as mentioned above
needs to define the approach for determining the capital resources eligible to meet regulatory
capital requirements and their value, consistent with a total balance sheet approach forsolvency assessment and having regard to the quality and suitability of capital elements. In
respect of MCCOs the Application paper on Regulation and Supervision supporting Inclusive
Insurance Markets makes the general point that “MCCOs may need to align their capital needs
with available resources more carefully than entities that can raise capital more flexibly andthis should be a matter of attention in their own risk and solvency assessment.” 76114.

The paper also mentions that given ”the nature of the MCCO structure, capital will also
be an area where the requirements will need to be considered and possibly adapted if MCCOs
are new to the market” and that when establishing criteria for assessing the quality andsuitability of capital resources “any reliance on guarantees should be of a limited duration
during a start-up period and be quickly replaced with retained surpluses. Some regulatory andsupervisory systems also recognise guarantees from third parties; this has been the way manysmall mutual insurance entities started.”77
115.

Notwithstanding the previous paragraphs, it is important that MCCOs meet a risk
based capital level to start and continue to operate. A simple risk based capital formula canbe developed in most jurisdictions that is informative to the regulator and the insurer on theamount of capital needed. All MCCOs have to be above the risk based capital calculation.
MCCOs usually would take smaller risks so the amount of capital will be lower.

116.

In principle, an MCCO would not have issued shares that would constitute tier 1 capital.
In respect of the quality and suitability of capital elements typical to the MCCO sector, it may
however be appropriate to include contingent elements that are not considered as assets
under the relevant accounting standards, where the likelihood of payment if needed issufficiently high according to criteria specified by the supervisor. Such contingent capital may
include, for example, members’ calls by a mutual insurer and may be subject to prior approvalby the supervisor. 78 The aforementioned Application Paper adds: “Normally, regulatory or
supervisory arrangements do not permit capital that can be raised through future calls on
members as “callable but unpaid capital or reserve items” to be eligible to meet regulatory
capital requirements. This may be permitted for MCCOs if, among other things it can bedemonstrated that such calls had been met in practice and there is very strong solidarity
amongst members.”79
117.

In addition, the supervisor may consider a similar treatment to the paid-in subordinate
member’s accounts, which has characteristics similar to subordinated loans. The latter are insome countries accepted as a suitable capital element provided the underlying conditions areapproved by the supervisor.

118.

119.
The valuation of both the members’ calls and members’ accounts may need verification/ certification by an independent auditor. Also, supervisory regulation may enable thesupervisor to call in unpaid members’ contribution and exercise the authority to a members’
call in case of financial distress of the MCCO.

76 Paragraph 3.33 of the Application Paper on Regulation and Supervision supporting Inclusive InsuranceMarkets
77 Paragraph 3.34 of the Application Paper on Regulation and Supervision supporting Inclusive InsuranceMarkets
78 Guidance 17.10.11
79 Paragraph 3.3.5 of the Application Paper on Regulation and Supervision supporting Inclusive InsuranceMarkets

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Capital resources
Belgium: Certain mutuals are entitled to ask members for additional contributions via a
variable premium setting mechanism.
Chile: Legislation for mutuals and for insurance companies does not include specificregulation related to the type and size of resources that can be used to meet the capitalrequirements. However, limits that apply to investments that back up required capital andtechnical provisions are different for mutuals compared to insurance companies.
Philippines: MBAs and cooperatives may make capital calls from its members to increase
capitalisation.
France: If the mutual is authorised by its by-laws to call for supplementary contribution fromits members, such calls, upon supervisory approval, may be considered as capital
resources. Besides, mutuals of the code de la mutualité can issue specific capital
instruments, called “certificats mutualistes”. These ‘notes’ can be reimbursed only whenthe mutual is liquidated (if it ever is), and after all creditors have been fully refunded.
Poland: use of members calls – only if the articles of association of mutual undertaking
specify the system of members’ payments to a mutual undertaking, annual surplus – thearticles of association of a mutual insurance undertaking may provide for the repayment ofshare capital only out of annual surpluses.
Turkey: From the capital aspect, it is sufficient that they have enough capital amountaccording to the Cooperative Law.
Uruguay: In accordance with law 18407, cooperatives in general are allowed to countamong their capital: subordinated shares, interest shares and other forms of capital(Articles 65, 65, 66, 67). Legislation for insurance cooperatives requires prior authorizationfrom the overseeing regulatory body before issuing these instruments.

3.5 Portfolio-transfers, Mergers, Demutualisation and Winding-up
Relevant Principles and Standards – The following requirements are relevant in thecontext of this section:
120.
•

The legislation defines a range of options for the exit of insurance legal entities from themarket; 80•

The transfer of all or a part of an insurer’s business is subject to approval by the supervisor,
taking into account, amongst other things, the financial position of the transferee and thetransferor. The supervisor satisfies itself that the interests of the policyholders of both thetransferee and transferor will be protected; 81•

A change of a mutual company to a share company, or vice versa, is subject to thesupervisor’s approval. The supervisor satisfies itself with the new constitution or governingorganisational document of the company before giving approval. 82

Transfer of insurance commitments in respect of MCCOs
A transfer of insurance commitments from an MCCO to another entity – either by
individual transfer or portfolio transfer or merger – may involve more legal considerations than121.

80 ICP 12

81 Standard 6:10
82 Standard 6:9

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in the case of such a transfer from a share company. This is caused by the fact that, dependingon the legal system at hand in addition to the contractual relationship, the membership of thecustomer with the MCCO is relevant. The insurance contract between the policyholder and
MCCO is governed by (insurance) contract law. This law and/or the insurance supervisory
regulations are likely to determine the process and conditions under which an insurance
contract can be transferred to another entity. The same would apply to the transfer of an entire
portfolio of insurance contracts. In the case of a merger - in which a legal entity is legally
integrated with an existing entity or together with another entity merges into a new entity
originating from that merger - corporate law will usually also have relevant provisions that need
to be complied with.
122.
In the case of an MCCO the customer will also have a membership with the MCCO
which will entitle him/her to democratic rights in the legal entity including involvement in key
decisions in the general meeting such as transfers of portfolio, mergers and a (voluntary)
winding-up. In addition, by virtue of the by-laws the customer may have financial entitlements
to the assets of the MCCO including possibly his/her member account. All the legal aspects
involved need to be considered and the supervisor needs to be knowledgeable of these inorder to properly manage any process of transfer, merger or winding-up.

Therefore, the supervisor may need to consider the following questions in addition to
the consideration from a prudential perspective 83 when dealing with a request for a transfer ormerger:123.

•

Which body within the MCCO is legally entitled to decide on the transfer or merger andwhich roles do the members have? What process was followed in practice?

•

Which legal powers do members have to challenge any decision taken in this respect inparticular: which legal means do members have to resist the transfer of their contracts
individually or collectively (for example cancellation of the contract)? What are theconsequences for individual policyholders of using any legal rights to resist a transfer (forexample reimbursement of (part of the) premium)?

•

What entitlements do the members have based on any regulation or by-laws in respect ofany funds (including member’s accounts), or assets of the MCCO, including remaining
profits? Which entitlements will they get after the transfer or merger?

•

Are members liable for any deficit or loss of the MCCO based on any regulation or bylaws? If so, what arrangements have been made by the MCCO in this respect at theoccasion of the transfer or merger?

•

How were the proposals for the transfer and their legal position communicated to themembers / policyholders?

124.
Other issues relating to transfer of portfolios would normally be identical or largely
similar to those issues that arise with respect to the transfer of participating or non-participating
policyholder portfolios between shareholder companies.

Transfer of portfolio and merger
Argentina: the Organic Law of Mutual Associations (Law No. 20.321) allows mergers without
the mutual being dissolved. Article 30 states that "mutual associations may merge between
themselves". The merger requires the approval of the General Assembly of Members andthe supervisor. Also, Resolution 729/88 widens the possibility of "absorption," which is to
say that a mutual may merge with another mutual creating a new mutual association that
directly integrates both, or one mutual can be absorbed by another mutual.
Chile: Mutuals are not allowed to merge or to transfer their portfolio.
83 In particular the review of the solvency position of the insurers involved in the transfer or merger

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Morocco: Merging two or more mutuals is pronounced after concordant resolution of thegeneral meeting of the mutual or mutuals which will disappear and the board of the acquiring
mutual. It becomes definitive after being approved by joint order of the Minister of Economy
and Finance and the Minister of Employment and Social Affairs. The absorbent mutual
receives the asset, in the form in which it is, and must pay the liability.

Demutualisation 84
Demutualisation is the process by which a mutual or cooperative is converted into ashare company. Demutualisation could be a formal legal process as such according to national
legislation, or de-facto achieved through a merger or portfolio transfer (from mutual to sharecompany). Demutualisation should be subject to the specific approval of the supervisor. In
principle it is a particular type of transfer which should be treated as such. However, membersin the mutual or cooperative are impacted in the sense that after the transfer they will no longer
be a member with only the insurance contractual relationship remaining. As this could
negatively affect members’ interests the path to change of control through demutualisation
should be carefully set out and communicated with the members in addition to theirinvolvement in the required decision-making process/es. In such cases, especially as they
may be rare, the supervisor may probably need to be able to request special expert reports
regarding the treatment of member interests.
125.

126.
It is important that the contributions of former members are recognised; otherwise, an
open demutualisation policy will promote the eventual demise of all MCCOs. All insurance cooperatives/mutuals build up capital over time, as they get older most of the capital comes fromprior members who "left money on the table" for the good of the community. In a
demutualisation the surplus from these prior clients could be transferred to a community fundand not the current policyholders. For example in a case of demutualisation in Canada all thesurplus was divided to current members, when from an actuarial point of view 80% of thesurplus was from members who were no longer with that insurer.

Process of demutualisation
Belize: Court approval would have to be given for the demutualisation.
Sri Lanka: In terms of the Companies Act, a cooperative will have to seek registration as ashare company and in the Articles state that the new company will take over the affairs of
the cooperative.
Tunisia: A- for mutual insurance companies: There is no specific regulatory framework. The
demutualisation of local mutual insurance companies that was achieved in April 2014
allowed for a process which includes financial and business analysis, information ofmembers, call for general assembly, and calls for capital. B- for mutual societies: This
process is forbidden according to the draft code of mutuals.
France: French legislation does not provide for ‘demutualisation’ as such. What exists
however in practice and has the same or similar result, is the creation of a stock company
by a mutual, which then transfers its insurance portfolio to the stock company.
Mexico: The regulation does not establish a demutualisation process. If a mutual company
wants to become an insurance institution it must meet with the all authorisation
requirements for a new institution.

84 Although less frequent, also remutualisation can occur. An example is remutualisation of the Swedish Skandia
Liv company (Study on the current situation and prospects of mutuals in Europe, European Commission,
November 2012: http://www.amice-eu.org/userfiles/file/EC%20Study%20prospects_mutuals_fin_en.pdf).

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Chile: Mutuals in Chile are not allowed to take a process of demutualisation since they
depend on the Army, Air Force, Navy and Police.
Germany: Also conceivable are restructurings - the mere consequence of which is a changeof legal form of a legal entity that changes its legal form, but maintains its legal identity.
New Zealand: Demutualisation would be a strict legal process requiring the approval ofaffected members and the involvement of the High Court.
Trinidad and Tobago: A detailed plan for the conversion of a mutual company into a
company with share capital should be submitted to the Central Bank of Trinidad andTobago. The Central Bank would appoint experts such as an independent actuary toinvestigate the financial position of the mutual company and a Financial Valuation Expert.
The actuary appointed shall upon completion of his investigation submit a report of theirfindings to the Central Bank including the allocation of shares to eligible policyholders, theprice range that shares in the new company will be sold to the public, and the rights ofpolicyholders. The Central Bank will also request any other information that is required suchas, details of policyholder communication, particulars relating to the financial state of thecompany, any changes proposed to be made in the memorandum and articles ofassociation and a statement of actual and/or contingent liabilities as determined by thecompany's actuary from the Board of Directors of the Company. Where the plan is approvedby the Central Bank it shall be laid as a special resolution before the policyholders of themutual company and the resolution would only be effective when a certain percentage of
votes cast by the policyholders are in favour of the process. A prospectus detailing theoffering would have to be approved by the Securities and Exchange Commission of Trinidad
and Tobago and the new company would have to be registered under the Companies Act.
United States: As there have been more than 200 demutualisations in the life industry alone,and each one has been driven by factors unique to each company’s situation, it is difficult
to answer so general a question. Demutualisation is conducted pursuant to the state law of
the insurer’s domicile and is subject to the approval of that state’s insurance commissioner;as part of that process the domiciliary state’s commissioner will seek the opinion of, andcooperate with, the commissioners of the various states whose businesses or citizens may
be affected.

Winding-up
As the winding-up of an MCCO marks the end of both the insurance contract andmembership relationship between member and MCCO, the supervisor is obliged to give due
consideration to the application of all applicable laws and regulations as well as the by-laws.
In addition, attention needs to be given to the liquidation of assets and entitlements toreserves, member’s accounts, and other items that members have according to national
legislation.
127.

128.
As part of the winding-up, the MCCO will likely appoint liquidators to settle contracts
and liquidate the assets. Sometimes the board itself may be charged with this task. The
liquidators will be accountable to the general meeting and report on its work. The supervisor
should monitor this process and review the reports prepared by the board and/or liquidators.

Winding-up
Chile: While there are some requirements in respect of a winding-up for insurancecompanies that is not the case for mutuals.
France: In the case of a (solvent) run-off, the excess of assets over liabilities cannot be
distributed to Members. It can only be allocated to other mutuals, or to some specific nonApplication Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
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profit institutions (“associations reconnues d’utilité publique”) upon decision of the General
Meeting.
Morocco: The winding-up of a mutual must be conducted under supervision of arepresentative of the Minister of Finance. The remaining assets shall be distributed by theGeneral meeting among other mutuals, on the proposal of the Board and after approval ofthe ministry of employment and social affairs.
Poland: Requirements relating to winding-up are slightly modified in respect of mutual
undertakings. According to article 200 of Polish Act on Insurance Activity, the provisions ofCommercial Partnership and Companies Code apply accordingly to winding-up of mutual
insurance undertakings with the exception of SMIU. Winding-up of SMIU proceeds in amanner specified in the resolution of the general meeting, but if the supervision authority
ascertains that winding-up activities toward SMIU have not been taken or conducted, theprovisions of Commercial Partnership and Companies Code apply accordingly to windingup of SMIU.

3.6 Supervision and Supervisory Review
Supervision
Relevant Principles and Standards - The following requirements are relevant in thecontext of this section:
129.
•

The authority (or authorities) responsible for insurance supervision, the objectives of
insurance supervision, and the mandate and responsibilities of the supervisor are clearly
defined in primary legislation; 85•

Where, in the fulfilment of its objectives, the supervisor identifies conflicts between
legislation and supervisory objectives, the supervisor initiates or proposes correction inlegislation; 86•

The supervisor needs to be operationally independent, accountable and transparent in theexercise of its functions and powers; 87•

The supervisor exchanges information with other relevant supervisors and authorities
subject to confidentiality, purpose and use requirements. 88

130.
The roles of policymaking, regulation and supervision of MCCOs are often shared
between a range of government ministries and authorities. As MCCOs can be part of a rangeof social and economic policy areas including financial services, agriculture, social welfare,
health and community relations, the likely range of interested authorities can be greater thanwould be the case with, for example, other forms of insurers. These other authorities may not
all be as fully conversant with issues with respect to providing financial products and services,
particularly insurance. It is also likely that arrangements for effective, complete, andcoordinated oversight will be more challenging and will have to consider a wider range ofpotentially competing objectives that will require special attention. Therefore, sucharrangements should be carefully examined to help ensure appropriate policyholder protection
is maintained.

85 ICP 1 and Standards 1.1 and 1.2
86 Standard 1.4
87 ICP 2
88 ICP 3

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131.
In such a situation, it is also possible that oversight of the supervisory elements
included in the ICPs may be allocated to one or more authorities for MCCOs and to anotherfor other insurers. Alternatively, the responsibility for most or all of the elements may rest withthe one authority or be shared between authorities. As stated above, the clear and transparent
allocation of responsibilities is needed. It is also important that, when shared, structures foreach supervisory authority are in place to ensure the requirements mentioned above aresupported in each authority where supervisory functions are carried out to the extent relevantto their allocated responsibility. The expectations for cooperation and information sharing willbe critical. See also paragraph 69 of this paper.

Designation of supervisory authority:
Trinidad and Tobago: Friendly Societies and Co-operatives fall under the purview of the
Ministry of Labour and Small Enterprise Development. The insurance industry including
mutuals is regulated by the Central Bank of Trinidad and Tobago.
As the ICPs apply to MCCOs that are functioning as an insurer, the supervisor –regardless of whether they are the authority responsible for commercial share companies –needs to meet the relevant Principles and Standards mentioned at the beginning of thissection. If that supervisor is part of a public organisation assigned with responsibilities of adifferent nature then care needs to be taken that its operational independence is safeguarded.
This might not be the case if the supervisor is a government department that needs to consider
other interests than strictly policyholder protection from a prudential or conduct of businessperspective.
132.

Supervisory review
133.
The supervisor should take a risk-based approach to supervision that uses both offsite monitoring and on-site inspections to examine the business of each insurer, evaluate its
condition, risk profile and conduct, the quality and effectiveness of its corporate governanceand its compliance with relevant legislation and supervisory requirements. The supervisor
obtains the necessary information to conduct effective supervision of insurers and evaluate
the insurance market. 89 The supervisor should also have the expertise to distinguish between
what is a genuine MCCO and what is one that is operating just under the name. In particular,
in the case MCCOs are allowed to operate under a light-touch regime there may be a risk ofregulatory arbitrage.
134.
This is a general requirement that applies equally to MCCOs as to share companies.
It may however pose challenges to a supervisor. First of all the supervisor needs to be mindfulof the specific features of the MCCO businesses including the way it is financed. This may
require specific knowledge of MCCO relevant legislation as well as its market segment.
135.
Also, reporting requirements may differ between share companies and MCCOs. This
is in particular pertinent for financial reporting based on the legal form of the insurer and vested
in corporate or accounting law. Often MCCOs have their own financial reporting requirements
and - depending on the size of the business – need to deposit or submit simplified financial
statements or could even be completely exempt from financial reporting. The supervisor will
typically require regulatory reporting by the supervised insurers for its off-site supervision. The
regulatory reporting may consist of (elements of) the financial reporting based on corporate oraccounting law. From a perspective of proportionality, the entire set of financial statements
submitted to the supervisor for the purpose of regulatory reporting should be appropriate toachieve and not go beyond the objective of the reporting, which is to have a sufficientunderstanding of the financial condition of the insurer. Relevant factors such as the nature of
89 ICP 9

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the insurer, size of the business, the markets in which it operates etc. should be considered
for this.
Another challenge may be the number of MCCOs active in the insurance domain inparticular if these are small-sized and show a wide regional distribution. The supervisor may
not have the resources to carry out its supervisory activities with the same intensity as for thebigger insurers. In those cases, it is worth considering balancing the supervisor’s resources
by introducing separate categories of administrative authorisation for small size MCCOs as is
described in paragraph 67 of this paper. The same is done in some jurisdictions for microinsurance companies. This authorisation – possibly a simplified registration process – could
be subject to conditions that set boundaries for the types of product lines and size of thebusiness. Such a system could be complemented with provisions on whistleblowing forexample by auditors or actuaries if they witness a breach of the conditions that are conditional
for a lighter-touch oversight.

136.

137.
For MCCOs subject to a restricted licence (i.e. limitations on the type of insurance risks
that they are allowed to write), it may not be necessary to conduct regular on-site inspections
as part of the risk based supervisory review, given the lower prudential risk that these MCCOs
pose. The supervisory review can instead encompass off-site reviews and on-site ‘visits’ tounderstand the past financial performance and future business plans of the MCCO. For that
purpose, supervisors should have the option to consider relief from regular on-site inspections
unless there are specific concerns which may require the supervisor to conduct regularinspections.

Reporting to the supervisor
Morocco: Mutuals must communicate each year: the financial statements, the moral andfinancial reports, the Minutes of the General Meeting, the report of the Control Committee,
and the financial documents and statistics required by regulation and any other document
requested by the supervisor.

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Annex 1: MCCOs as defined in various countries 90
European Mutuals
Country

Legal types

Austria

Versicherungsverein auf Gegenseitigkeit(insurance mutual)
Kleine Versicherungsvereine auf
Gegenseitigkeit(small mutual insurance association)

Belgium

Bulgaria
CyprusDenmark
FinlandFranceGermany

GreeceAssociation d'assurance
mutuelle/onderlinge
verzekeringvereniging (Mutual
insurance society)
Société mutualiste/maatschappij vanonderlinge bijstand (Society of mutual
assistance / Mutual benefit company)
взаимозастрахователна кооперация
(mutual insurance cooperative)εταιρεία περιορισμένης ευθύνης μεεγγύηση (company limited byguarantee)
Gensidige selskaber (Mutualcompanies)
Keskinäinen vakuutusyhtiö/ömsesidigt
försäkringsbolag (mutual insurancecompanies)
Vakuutusyhdistys/försäkringsförening(insurance association)
Työeläkevakuutusyhtiöistä /arbetspensionsförsäkringsbolag(Pension Insurance Companies)
Société d’assurance mutuelle (mutual
insurance companies)
Mutuelles (mutuals)

Versicherungsverein auf Gegenseitigkeit(insurance mutual)
Kleine Versicherungsvereine (small
insurance
mutual)αλληλασφαλιστικός συνεταιρισμός
(mutual insurance cooperatives)
Allilovoithitika Tamia/ Αλληλοβοηθητικά
Ταμεία (Mutual health funds)

Lines of business the Legal type isallowed to operate in
Mutual insurers are allowed to be active
in all insurance classes, both life andnon-life.
The activities of small mutual
associations are restricted to the lines ofbusiness specified in positions 8 and 9 ofAnnex A of the Insurance Supervision
Act except nuclear risks.
Life and non-life insurance

Non-life insurance: complementary
health insuranceLife insuranceLife insuranceLife and non-life insuranceLife and non-life insuranceLife and non-life insurance
Statutory pensions
Life and non-life insuranceLife and non-life insurance(complementary health insurance) They
can also manage facilities dealing withhealth, culture and society. Some ofthem are also active in the compulsory
statutory insurance domain.
Life and non-life insuranceLife and non-life insurance
Non-life insurance
Compulsory/duplicatory healthcare/insurance (not part of the social
protection system as such)

90 The list of laws and the discriptions in this annex 1 are subject to change.

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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Hungary

IrelandItaly

LatviaLuxembourg

Biztosító egyesület (Mutual Insurance
Association)Önkéntes kölcsönös biztosító pénztár(voluntary mutual insurance fund)Friendly societies
Società di mutuo soccorso (benefit
mutual societies)
Società di mutua assicurazione (mutual
insurance companies)
Savstarpējās apdrošināšanas
kooperatīvā biedrība (mutual insurancecooperative society)
Association d’assurances mutuelles(mutual insurance association)
Société de secours mutuel (mutual aid
society)

Malta

Mutual association

Netherlands

Onderlinge Verzekeringmaatschappijen/
vereniging (insurance mutual)
Gjensidige forsikringsselskaper (mutual
insurance company)
Towarzystwo ubezpieczeń wzajemnych(mutual insurance company)
Associações mutualistas (mutual
associations)

NorwayPolandPortugal

Mútua de seguros (Mutual Insurancecompany)
Romania

Slovenia
Spain

SwedenSocietăţi mutuale’ (mutual companies)
Casa de Ajutor Reciproc a Salariatilor –Mutual Associations of Employees CAR;
Casa de Ajutor Reciproc a Pensionarilor– Mutual Associations of Pensioners –CARPDružba za vzajemno zavarovanje(mutual insurance company)
Mutuas de seguros (mutual insurancecompany)
Mutualidades de previsión social(mutual provident societies)Ömsesidiga försäkringsbolag (mutual
insurance companies)
Försäkringsföreningar (insurance
associations)non-life and life insurance
Services for members that supplement or
replace social security services, as well
as services that promote healthy lives.
Life insurance
The mutual aid societies (società diMutuo Soccorso) operate in the areas ofhealth, social, recreational and culturalactivities
Life and non-life insuranceLife and non-life insuranceLife and non-life insurance
Mutual assistance in the social domain.
The main benefit offered by these latter
category of mutuals consists in thepayment of funeral grants, which is why
they are commonly defined as “funeralfunds”
life and non-life insurance (non-directive
insurers: annual gross premium income(other than from contracts ofreinsurance) has not exceeded 5 million
euro )
Life and non-life insurance including
compulsory health insurance
life, non-life and re-insurance
life, non-life and re-insuranceLife and non-life Insurance. Mutual
associations may undertake activities
other than insurance – but always within
the realm of welfare and health careprovision.
Mutua de seguros are allowed in life
insurance, in non-life insurance and inreinsurance.
life and non-life insuranceSocial services, no insurance

non-life and life insurance(complementary health insurance)
Life and non-life insuranceLife and non-life insurance
life, non-life and re-insurance
life, non-life and re-insurance

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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United
Kingdom

In United Kingdom, mutual-typeorganisations are defined as broader
than in other countries and the legal
framework largely leaves open which
form one chooses for being a mutual.

Life, non-life and re-insurance and other(noninsurance and non-financial)services.

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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Non-European Mutuals
Country / Source oflawSouth Africa(The
Long-term
Insurance Act, no. 52
of 1998 • The Shortterm Insurance Act, no.
53 of 1998 • The
Friendly Societies Act,no 25 of 1956 • The
Financial Advisory andIntermediary Services(FAIS) Act, no. 37 of
2002. • The Cooperatives Act, no. 14
of 2005)

Definition of MutualForm of mutuals

South Africa does not havespecific definition of mutual. It
has various laws governing
the insurance outreach to thepoor. Both the long term andshort term insurance acts
have defined a number ofclasses of policies for which acompany can register. Long
term insurance includes
benefits payable in the caseof a life or disability event,whereasshort-term
insurance policy classes
relevant to micro-insurance
includes motor and property
insuranceor
personal
accident
insurance.
Effectively the result is a
product
category-based
regulatory system where thenature of the risk event
underlying
theproduct
determines the level of risk
held by the insurer andtherefore the appropriate
regulation.

Definitions of different form of Mutuals
Friendly societies 91 are non-profit organisations or associationsof persons established to provide relief or maintenance during
minority, old age, widowhood or illness for members or persons
related to members. Such relief could include payment of a sum ofmoney on birth of a child or upon death, insurance of tools used ina trade, unemployment benefits, for education or training ofmembers or their children, or such other business as may beproclaimed in the Government Gazette.
Co-operatives are autonomous associations of persons (aminimum of five) united voluntarily to meet their mutual economic,
social and cultural needs through a jointly owned and controlled
enterprise that is organised and operated on co-operative
principles. Directors must not be of unsound mind, financiallyinsolvent, or have been convicted of certain offences (theft,
forgery, etc.) (s.33 Cooperatives Act).

Burial societies 92are generally formed by people who know eachother, such as family or friends. An archetypal burial society is
characterised by member governance, is not for profit, meets atleast once every month and usually has, at the branch (primary

91 https://www.fsb.co.za/Departments/retirementFund/friendlySocieties/Documents/FSAR2005.pdf

92 http://cenfri.org/documents/microinsurance/2005/South%20Africa_Regulation%20of%20formal%20and%20informal%20insurance%20markets.pdf

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based Organisations in increasing access to Insurance Markets
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Country / Source oflaw

Definition of Mutual

Philippines(Administrative code;
Insurance
Codechapter VII)
Department of Finance
Order 15-2012 of 1stJune 2012

Any society or association,
whether incorporated or not,formed or organised for the
purpose of paying sickbenefits to members, or offurnishingsupporttomembers while out of
employment, or of furnishingprofessional assistance tomembers, or of paying torelativesofdeceased
members a fixed or any sumof money, irrespective ofwhether such aim or purpose
is carried out by means of
fixed dues, assessments, orvoluntary contributions, or ofproviding for any method ofaccident or life insurance
among its members out ofduesorassessments
collected
fromthemembership, and any societyor association making either
or any of such purposes
incidental features of its
organisation on the basis of
fixed dues or assessments
specifically provided for tomeet such incidental features

Form of mutuals

Definitions of different form of Mutuals
society) level, no more than 300 to 500 members (and usually far
fewer – the average membership ranging between 50 and 80).
Funeral parlours are primarily in the business of providing funeralservices. However, in an attempt to secure a market for these
services, many have added a number of financial services to theirportfolio. These include insurance (legal and illegal), credit (mostly
in rural areas) and savings (pre-paid funerals).

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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Country / Source of
law
India
(Co-operative
Societies Act, 1912 (2of1912;
Indianinsurance Act 1938;
Microinsurance
regulations 2005)
Defined in Part 4
Sec 95 93 before recent
amendment of 2015

Definition of Mutual"Mutual Insurance Company"
means an insurer, being acompany incorporated underthe Indian Companies Act,1913 (7 of 1913), or underthe Indian Companies Act,l882 (6 of 1882), or under the
Indian Companies Act, 1866
(10 of 1866) or under any Act,
repealed thereby, which has
no share capital and of whichby its constitution only and all
policy-holders are members.

Form of mutuals


NonGovernment
Organisations



Self-HelpGroups

Micro-FinanceInstitutions



Cooperatives

Definitions of different form of Mutuals
Means a non-profit organisation registered as a society under any
law, which has been working at least for three years with
marginalised communities, with proven track record, clearly statedaims and objectives, transparency and accountability as outlined
in its memorandum, rules, byelaws and regulations, as the casemay be and demonstrates involvement of committed people.
Means any informal group consisting of ten to twenty persons
which has been working for at least for three years with
marginalised communities, with proven track record, clearly statedaims and objectives, transparency and accountability as outlined
in its memorandum, rules, byelaws and regulations, as the casemay be and demonstrates involvement of committed people.
Means any institution or entity or association registered under any
law for the registration of societies or cooperative societies as thecase may be, inter alia, for sanctioning loan / finance to its
members
Autonomous association of persons united voluntarily to meet theircommon economic, social, and cultural needs and aspirations
through a jointly-owned and democratically-controlled enterprise

93 https://www.irda.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?page=PageNo107&flag=1&mid=Insurance%20Laws%20etc.%20%3E%3E%20Acts

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based Organisations in increasing access to Insurance Markets
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Annex 2: Examples of the Role of MCCOs
Function
Country
As carriers of insurance West Africa
risk
As distributors

India

Supporting premium
collection

Philippines
India

As part of the claims
assessment process

India

As the policyholder of a Sri Lanka
group insurance
Philippines
product
GuineaDescription
The UEMOA legislation, brought out Economic Community of West African States (ECOWAS), establishes
a multinational framework which allows mutual social health organisation to underwrite health insurance andsimplified accounting requirements have been prescribed for such providers.
The Microinsurance Agent Regulations (MAR) brought out by the Insurance Regulatory And Development
Authority (India) have recognised self-help groups to tie-up with insurers not only for collection of proposal
forms but also for collection and remittance of premium and policy administration service. Local handling ofmarketing and sales lowers transaction costs.
Remittances of funds from Filipino workers overseas have been an important source of support to local
families and the wider economy. Church groups providing support to communities of foreign workers haveworked with insurers in the Philippines to collect premiums on insurance products during their regularcommunity meetings and remitting them collectively to insurers, reducing cost and improving the efficiency ofthese contributions.
The MAR brought out by the Insurance Regulatory And Development Authority (India) have allowed self-helpgroups to assist in the claims settlement process.
Savings and credit cooperatives (SACCOs) can offer group insurance coverage tailored to the needs of theirmembers by negotiating premium rates. This fact is also an example of motivating collective risk reduction
through individual action and has implications for influencing the quality and cost of services provided to lowincome segments.

As part of the process India Nepal Mutual societies are active in information dissemination of formal social protection and poverty alleviationof understanding
South Africa programs. They also ensure registration of all eligible citizens and monitoring by civil society.
customers
As part of theprocess ofeducatingcustomers

Ethiopia
ZambiaBrazilIndia

As providers ofBrazil, India
complimentary services Philippines

Community groups along with MFIs, perform needs analyses and awareness campaigns in a variety of ways,
including focus group meetings, street plays, and inviting microinsurance claims recipients to tell others about
the benefits of insurance. This enhances awareness of insurance and encourages collective action and risk
reduction activities by all group members.
Many credit cooperatives complement their financial services offering, namely savings and loans, by crossselling life and non-life insurance. Sometimes this may involve non –financial products too.

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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Annex 3: Examples of Associations of MCCOs
1. Global

The International Cooperative and Mutual Insurance Federation (ICMIF) is a long established(founded in 1922) and unique global organisation representing cooperative and mutual
insurers from around the world. ICMIF holds eight years’ worth of exclusive data about themutual sector. With its global headquarters in the United Kingdom and regional offices in
Washington DC, USA; Tokyo, Japan; and Brussels, Belgium; today ICMIF represents 230
values-based insurers in 70+ countries with over US$ $ 270 billion premium income. ICMIF
delivers unique networking opportunities; market and member intelligence; and external
relations services. It takes a strong lead in encouraging best practice amongst its member
firms in key insurance issues, including: performance management, legal and governance,
marketing, brand and reputation, reinsurance and social and environmental performance.
ICMIF is also active in the fields of microinsurance and Takaful, with Takaful providing
Shariah-compliant risk amelioration products to Islamic markets.
2. Regional

The Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE) Createdin January 2008 through the merger of the two previously existing associations of mutual andcooperative insurers in Europe, AISAM and ACME, represents the interests of the sector with
one united voice. It provides a platform for mutual and cooperative insurers of all sizes tocombine resources and expertise, exchange experiences across national borders and discuss
key issues and concerns relating to planned legislative and regulatory changes anddevelopments. Significance of AMICE could easily be ascertained with its membership baseof 110 direct members representing above 1000 insurers. AMICE promotes the mutual modelthrough various initiatives and having strategic partnership with other key organisations. It
works closely with members to advocate and bring relevant policies for growth of mutuals in
European market. It enables to voice the concerns of small and medium enterprises engaged
in mutual model.
The Confederation of Financial Institutions (CFI / West Africa is the grouping of six approved
federations of mutual saving and credit: RCPB-(Burkina Faso) FECECAM (Benin) FUCEC(Togo) KAFO JIGINEW (Mali) NYÈSIGISO (Mali) and PAMECAS (Senegal). The head officeof the Confederation is in Ouagadougou, Burkina Faso. It is a regional movement of financial
unions under the law # 59/94/ADP on the regulation of Mutualist Institutions or Savings andCredit Unions of Burkina Faso since 2007. Its major focus is on representing the cooperative
movement as a whole to the authorities, thereby negotiating agreements with the government.
It has been continuously striving to improve the visibility of the CFI and its members in Africa
and the world
3. National

Mutualité Française (National Federation of French Mutual Benefit Societies- FNMF) - FNMF
is the leading player in the area of complementary health insurance; covers 38 million people
thereby 95% organisations, in France. Its activities fall within both national and local priorities
for action. Its efforts are driven towards reducing health inequalities. It leverages throughpartnerships with other health and welfare professionals and is supported by a network ofprofessionals coordinated at the national level.
The National Cooperative Union of India (NCUI) is the apex organisation representing theentire cooperative movement in the country. It was established in 1929 as All India
Cooperative Institutes Association and was re-organised as Indian Cooperative Union throughthe merger of Indian Provincial Cooperative Banks' Association with All India Cooperative
Institutes Association and later in 1961 as National Cooperative Union of India. At present,
there are 207 institutions which are members of NCUI. NCUI works on multiple levels to foster
the growth of cooperative in India. It provides networking and advocacy platform by organising
Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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events, conferences and seminars etc. It enters into partnerships with other global forums inorder to enhance peer to peer learning. NCUI has created awards and expresses opinions
through periodical journals, seminar paper etc.
To summarise the above discussion, one can conclude that there are various roles played by
the apex organisations and federations. Such close associations could result into thedevelopment of innovative products and practices beyond usual networking and advocacy.

Application Paper on Regulation and Supervision of Mutuals, Cooperatives and Community-based
Organisations in increasing access to Insurance Markets
Adopted by the IAIS Executive Committee on 12 September 2017

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