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Europe's mutual insurance model proves sustainable, AM Best says

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Europe’s mutual sector has demonstrated the sustainability of its model amid an increasingly challenging operating environment, according to a new report from AM Best.

As regulatory and competitive pressures increase, AM Best says European mutuals have used a variety of structures to gain scale and successfully create leading groups in various markets.

The ratings agency's report finds larger mutuals in particular have enhanced their competitive positions. Over recent years, Europe’s mutuals have invested in IT systems and enhanced their digital presence, a trend the COVID-19 pandemic has significantly accelerated.

“These efforts help maintain the strong relationship between mutuals and their members, which is crucial to the long-term success of the segment,” AM Best said. “Despite their unique ownership structure, mutuals have found different ways to grow and create mutual groups over the years.”

AM Best says mutuals have adapted to growing regulatory requirements, changing customer expectations, and intensifying competition. In some cases, these adaptations have taken the form of changes in mutual groups’ legal structures, allowing mutuals to gain in scale and develop leading positions in their markets despite challenges related to their structure.

Over time, investment in IT infrastructure and data analytics should result in better pricing capabilities for underwriters, while increased automation would drive down expenses, AM Best says.

“Mutuals that invest in innovation should be best placed to prospectively enhance their profile and continuously future proof their operations,” it said.