Peak Re report highlights the importance of MCCOs to the insurance industry

Thursday, 10 January 2019

Peak Reinsurance Company Limited (“Peak Re”), a global reinsurer based in Hong Kong, recently published a new report on Mutuals and Cooperatives and Community based Organisations (MCCOs).

The report is entitled “Relevance of Mutual and Cooperative – Lessons learned from developed Europe and Asia” and it aims to highlight the importance of MCCOs to the insurance industry and how they play a key role in supplementing the social welfare system.

Key findings from the Peak Insights 2018 – “Relevance of Mutual and Cooperative: Lessons learnt from developed Europe and Asia” report include:

  • MCCOs account for more than 30% of the insurance markets in Europe and North America while Japanese MCCOs generate 80% of the mutual premium in the Asia and Oceania region
  • Significance continues to grow because of their relevance to communities and benefits to the social groups that they serve
  • Good and effective governance is key for the sustainability of MCCOs
  • Proven profitability and outstanding governance enhance ability to raise capital

According to the report, MCCOs’ market share is set to continue to grow because of their relevance to communities and the benefits to the social groups that they serve.

Arina Tek, Vice President, Market Research and Analysis, at Peak Re and author of the report, says, “MCCOs have supported economic development and social stability. Their rise in popularity was built around relevance and simplicity of purpose to members, long before the existence of a social welfare system. Today, while social welfare is common in developed countries, MCCOs still have a role to play as supplement to the social welfare system and to commercial insurers.”

For MCCOs to be sustainable, good and effective governance is key, says the report.

“Good and effective governance is essential to preserve the identity of MCCO. It ultimately relates to the organisation’s ability to stay relevant, trusted and be sustainable. Governance for MCCOs must be structured in a way to hear members and employees’ voices as it shows how much the management cares about their future.”

The report concludes that “Good and effective governance is also another means to attract third party capital because it supports the argument that MCCOs are sustainable.”

Peak Re says it has produced this report in recognition of the mutual concept as part of its mission to narrow the protection gap.

The report also contains examples of best practices of successful MCCOs with details of how they stay relevant to society while addressing regulatory requirements and potentially external investors.

Franz Josef Hahn, Chief Executive Officer of Peak Re, commented on the report, “The subject of MCCOs is not usually discussed despite its long operating history and its growing market share. I am proud that Peak Re is demonstrating its commitment to this important sector with this report by providing useful insights on MCCOs. This research topic was initiated as we recognised the benefits of MCCOs and our shared objectives to support community to fight against poverty. This is well aligned with Peak Re’s strategy to support the needs of communities through meeting reinsurance needs in Asia and around the globe.”

The report is available to download here.