A.M. Best: small P&C insurers my not “realize the benefits” of demutualization

Published: September 5, 2017

Updated: July 24, 2018

Author: Luke Jones



Canadian insurance companies have had the option to demutualize since 2015, something Economical Insurance decided to do. While the giant is moving through its process, A.M. Best Company Inc. says smaller mutual P&C companies “may not realize the benefits when all practicalities are considered,” when deciding whether to demutualize.

The federal government opened regulations in 2015 for mutual insurance carriers to demutualize. While some companies, like Gore Mutual, decided against the move, Economical opted for it. The company’s plans to demutualize have been in action since late 2015. After seeking board and policyholder support, Economical announced this February that its conversion proposal will be submitted before February 22, 2018.

The Ontario Superior Court of Justice now hosts two policyholder committees. One nine-strong committee represents eligible policyholders and the second of six people is for non-mutual policyholders. In a new report, A.M. Best says it may be tough for smaller insurers moving through demutualization:

“While the committees negotiate, Economical will prepare the rest of its conversion proposal,” the company said in its special report, titled Canadian Property/Casualty and Life Remain Stable as Economy Rebounds, While Housing Market Bears Watching.

“Economical has noted that the demutualization process has taken longer to complete than the demutualization of life insurance entities in the 1990s due to opposition that simply did not exist in the past,” A.M. Best added. “Organizations both external and internal to the industry have expressed opposition, making the demutualization process more difficult than it had been, but not impossible.”

“Although Economical Mutual may have the size and scale to accomplish the process favorably, smaller mutual companies that attempt to demutualize may not realize the benefits when all practicalities are considered,” A.M. Best said in its Aug. 31, 2017 report.