Interest in mutual risk protection arrangements has increased as organisations look to address market failures, a federal parliamentary inquiry was told last week.

Business Council of Co-operatives and Mutuals CEO Melina Morrison says the peak body’s membership operates under various risk pooling arrangements.

“The discretionary mutual fund model is the one that’s been growing notably over the last decade, particularly in small business and not-for-profit sectors, and this is because it is flexible and can facilitate innovative solutions,” she told the small business insurance inquiry.

Ms Morrison said mutuals must be well structured and backed by a business case, and they are not a panacea.

The growth of discretionary risk mutuals has been supported by a Corporations Act change in 2019 that improved access to capital, but Ms Morrison said further legislative reform is needed to protect legacy assets and to align Australia with overseas jurisdictions.

There are at least 28 discretionary mutuals servicing groups such as faith-based organisations, motor dealerships, housing providers and hospitality businesses.

Mutuals are not insurers, with participants paying contributions. However, they typically have reinsurance arrangements in place.

The inquiry held two days of hearings last week, with evidence presented by insurers, brokers, lawyers and groups representing industry sectors. Its terms of reference include the affordability and availability of insurance products and the adequacy of the regulatory framework.

The Insurance Council of Australia is pushing for a review of civil liability settings, action on levies and taxes, and increased mitigation spending.

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