Cooperatives and mutual insurers face a longstanding challenge in accessing external capital. While stock companies can issue shares to raise funds, mutuals and cooperatives rely primarily on capital gained through retained earnings from premiums and returns on investments. This reliance limits their ability to expand and innovate, compete with stock insurers, and meet regulatory solvency requirements, particularly in the event of significant losses. ICMIF members and Supporting Members have been addressing the issue of raising capital in innovative ways.
In 2016, ICMIF Supporting Member Swiss Re published a sigma report, Mutual insurance in the 21st century: back to the future? (with contributions from ICMIF), which examined the challenges and opportunities facing mutual insurers worldwide. The report highlighted a range of options to access external capital, including borrowing and debt instruments, new mutual capital instruments, reinsurance, alternative risk transfer and insurance-linked securities (ILS). The report also included examples of emerging regulatory frameworks that enable mutuals to access external capital while preserving their member-owned structure.
The 2024 Global Mutual Insurance Market Scan by ICMIF Supporting Member EY also explores capital challenges, noting that maintaining sufficient capital reserves can impact mutuals’ ability to offer competitive pricing or return dividends to members.
As pointed out in the ICMIF 2020 Mutual Insurance Guide, mutual insurers are not under pressure to return excess capital to shareholders. The report explains that they adopt a more conservative approach to financial management and a more prudent approach to capital. The report mentions different ways in which mutuals raise capital, from new instruments like mutual deferred shares or certificats mutualistes to structural arrangements and provisioning techniques like retained earnings, subordinated loans, membership accounts or supplementary calls.
Internal capital generation
The 2024 Global Mutual Insurance Market Scan suggests different options to access capital. The most common approach is retaining earnings and reinvesting profits back into the organisation rather than distributing them as dividends. While this method is slow, EY explains that it aligns with the mutual ethos of prioritising long-term stability over short-term gains.
A further approach involves raising capital through member contributions, either by increasing membership fees or issuing mutual capital instruments (MCIs), where jurisdictions allow it. EY notes that MCIs enable mutuals to raise funds from members without diluting control, carry long-term, fixed interest rates and are designed to absorb losses, thus protecting the mutual’s financial stability.
The report also found that accessing capital is a greater constraint for smaller mutuals, whereas larger ones are generally more comfortable with their access to capital for growth and investment.
Debt-based capital instruments
Borrowing is another way in which cooperative and mutual insurers can raise capital. This can include subordinated debt, unsecured bonds and hybrid capital instruments.
Subordinated debt
Subordinated debt is a form of borrowing that ranks below other debts if a company falls into liquidation and can be structured in a way that respects the mutual ownership model.
For example, in 2018, P&V (Belgium) raised an additional EUR 390 million through a ten-year subordinated bond, which these same historic partners subscribed to. Of this amount, EUR 160 million was classified as new money and EUR 230 million came from earlier loans issued in 2008-2009 (to overcome the then financial crisis) and in 2012 (to purchase VIVIUM shares).
Unsecured bonds
Meanwhile, Achmea (Netherlands) demonstrated strategic agility in managing capital during the early months of the Covid-19 pandemic by issuing a EUR 732m unsecured bond. This move was aimed at refinancing an existing bond maturing in November of that year, ensuring liquidity and financial stability amid market uncertainty. At issuance, Achmea reported a strong solvency ratio of 219% and EUR 732 million in liquidity, reflecting its robust financial position despite emerging risks.
Achmea’s diversified business model and prudent investment approach helped mitigate the early financial impact of the pandemic. This example illustrated how mutual and cooperative insurers like Achmea can leverage alternative capital instruments, such as senior bonds, while maintaining their purpose driven focus and financial resilience. It also underscores the importance of capital access for navigating market disruptions and sustaining long-term value.
Hybrid capital instruments
Another way in which some cooperatives and mutuals can access capital is preferred shares issued by their stock subsidiaries. For example, in Canada, Cooperators General Insurance Company issues Class E Preference Shares to raise regulatory capital. These shares come with fixed dividends but no voting rights meaning that, Cooperators General Insurance Company can preserve its cooperative ownership.
Mutual and cooperative specific capital instruments
Mutual Capital Instrument (Australia)
In 2019, the Australian Federal Parliament passed landmark legislation for mutuals, the Treasury Laws Amendment (Mutual Reforms) Act 2019, opening up a number of new opportunities for federally registered cooperatives and mutual businesses in Australia to grow whilst safeguarding mutuality for future generations. Australian ICMIF member BCCM was at the forefront in advocating and developing this new law.
Melina Morrison, BCCM CEO, stated that the changes levelled the playing field and gave mutuals the opportunity to compete with the larger, listed entities. These reforms confirm the strength of mutuals as a customer-led business model. By adding the legal definition of mutual entities, the Act recognises mutuals as a legitimate business model and creates more competition in business, giving customers more choice.
A major change for mutuals and members was the expanded ability to raise capital, enabling growth in the broad range of industries in which BCCM members operate. This new type of equity, the ‘Mutual Capital Instrument,’ can only be issued by mutuals.
Australian Unity was the first mutual to take advantage of these legislative changes. In November 2020, it launched an offer of Australian Unity Mutual Capital Instruments to raise AUD 100m in 2020.
Mutuo (UK), a leading advocate for mutuals which promotes all types of cooperative & mutual business through public affairs and political advocacy and policy development, worked closely on the legislation project with BCCM.
Mutual deferred shares (UK)
In 2015, the UK Parliament passed the Mutuals’ Deferred Shares Act 2015, which created a new class of equitylike instrument intended to help mutual insurers and friendly societies raise capital without demutualising. However, key regulatory provisions remain unimplemented, which prevents mutuals from using this instrument in practice. ICMIF member Association of Financial Mutuals (AFM) has been calling for the completion of the framework since the Act passed.
Certificats mutualistes (France)
In France, the 2014 Loi Économie Sociale et Solidaire (Loi Hamon) introduced certificats mutualistes to enable mutuals to raise long-term capital without demutualising or issuing traditional shares. These certificates do not confer voting rights, and, as such, do not dilute member control. They are redeemable at a fixed value and offer remuneration based on the mutual’s results. The certificates can be sold to the members of the company, to companies of the same group and more widely. The remuneration of the certificates is fixed every year by the General Meeting, and they are refundable only upon winding-up of the company.
To date, two French mutuals have issues: AG2R La Mondiale and Groupama. AG2R La Mondiale issued the certificates in 2016, and by 2023, it had EUR 358m outstanding across more than 22,800 accounts.
Member shares in cooperatives (Belgium)
Public issuing of cooperative shares, a tool available to cooperative insurers only, is another capital-raising instrument. Belgian cooperative insurer P&V Assurances has employed several strategies to raise capital from existing (institutional) cooperators and other organisations as well as through a public issuing of capital to customers, staff, and tied agents in 2018.
Before these new measures to raise capital were initiated, the cooperative maintained low capital levels (around EUR 511,000 euros) but kept high reserves (EUR 2 billion). In June 2018, P&V raised EUR 44.9 million of new capital from the organisation’s historic cooperative partners, including workers’ unions and health mutuals as well as two French mutual insurers, Macif and MAIF.
The insurer also opened its capital to customers, staff, and agents through EUR 1,000 “C shares”. Although no financial target was set and uptake was expected to be modest, the initiative aimed to foster a cooperative revival by engaging customers and involving them in the company’s life.
Member bonds (Germany)
In Germany, cooperative and mutuals, including in the insurance sector, can issue member-only bonds to raise capital directly from their members. Known as Mitgliederanleihe, these bonds are often marketed as a “solidarity investment” for members, qualify as Capital 2 capital under Solvency II requirements and are usually subordinates.
Membership accounts (Netherlands, Germany and Nordic countries)
Used by mutuals in the Netherlands, Germany, Finland and Norway, a membership account is a long-term capital account held in the name of a member. Members contribute capital, which the mutual can use as part of its solvency buffer. This instrument allows mutuals in these countries to raise core capital from members without issuing shares.
Supplementary calls (UK, Nordic countries and The Netherlands)
Supplementary calls are additional premiums charged to members if claims exceed expectations for a given policy year. Used by mutuals only, primarily in the UK, Norway, Sweden, Finland and The Netherlands, they provide contingent capital by allowing members to be charged additional contributions if claims exceed expectations. They are used primarily by marine mutuals, industrial mutuals, and some regional property and casualty mutuals.
Alternative risk transfer and reinsurance-linked capital
Alternative risk transfer and reinsurance instruments provide capital relief by transferring risk rather than raising traditional capital. Instruments include insurance-linked securities (ILS), catastrophe bonds, reinsurance arrangements, and hybrid bank–ILS structures.
ILS can enable cooperative and mutual insurers to raise capital. Non-mutual reinsurers can offer valuable lessons as well. For example, Swiss Re launched an Alternative Capital Partners division in 2019 to connect reinsurance with alternative capital sources such as ILS. In 2022, this division facilitated a partnership between Swiss Re, J.P. Morgan and institutional investors to secure USD 1.15 billion in protection for severe underwriting-related losses.
The deal offers Swiss Re protection from severe underwriting losses for the fiscal years 2022–2026. Swiss Re described this first-of-its-kind hybrid transaction, which brought together bank financing and ILS markets, as a “landmark transaction” within the reinsurance and ILS markets.
In 2024, UNIPOL (Italy) issued cat bonds with indemnity structures, securing EUR 100m in collateralised earthquake reinsurance from the Azzurro Re II DAC (Series 2024-1) catastrophe bond.
Structural capital mechanisms
Mutual holding company (USA)
Changes to corporate structure can also enable mutuals to access capital markets. In the USA, a mutual specific innovation is the mutual holding company.
For example, Harford Mutual Insurance Company (USA) converted to a mutual holding company structure in October 2020. The organisation also formed Harford Mutual Insurance Group, Inc (HMIG), now the parent company to three stock underwriting insurance companies: Harford Mutual Insurance Company, Firstline Insurance Company, and 1842 Insurance Company. While the stock companies beneath HMIG can issue shares, those shares are not publicly traded in open markets but serve as capital instruments within the mutual holding company group. HMIG said at the time that the conversion enabled it to provide the same mutual membership rights to the policyholders of all its subsidiary insurance companies and its underwriting company. Another advantage mentioned was the ability to expand innovation and growth capabilities while preserving policyholder membership and mutuality.
All existing and future policy holders of Harford Mutual Insurance Company retained their mutual ownership rights and became members of HMIG.
Société de Groupe d’Assurance mutuelle (France)
Since 2001, French law has enabled the creation of a “Société de Groupe d’Assurance mutuelle” commonly known as SGAM, a mutual group structure is open to all legal types of European insurance undertakings, including cooperatives and mutuals.
By forming SGAMs, French mutual insurers can exploit economies of scale, to diversify their risk structure and to optimally face regulatory expectations, whilst retaining their specific mutual structure and governance. Under Solvency II requirements, each new SGAM requires the approval of the prudential and anti-trust authorities.
SGAMs can also issue certificats mutualistes.
Horizontal groups (Germany)
In Germany, cooperative and mutual insurers can form cooperative alliances, known as horizontal groups. Based on contractual agreements, these groups enable them to coordinate strategy, pool risks, and be treated as a group under Solvency II without creating a shareholder-owned parent.
ICMIF members HUK Coburg and R+V Versicherung form part of horizontal-style mutual groupings.
This article was posted in January 2026. To the best of our knowledge, all information included was accurate at the time of posting.
If you would like to have an example included or provide more detailed information on an initiative that is referenced in the article, please contact Anca Voinea at [email protected].
