Companies not rushing to demutualize alongside Economical Insurance
Published: December 16, 2017
Updated: October 30, 2018
Author: Luke Jones
CATEGORY: Industry News
In the summer of 2015, the federal government announced new legislation that allows mutual property and casualty insurance providers to demutualize. Several months later, Waterloo, Ont.-based Economical Insurance said it will begin a demutualization process. Two years on, Economical is still on that path, but don’t expect other mutual’s to join the company.
Economical is now deep into finalizing its demutualization, which is likely to happen in 2018. However, it is increasingly looking like the company will be the only one to embrace the demutualization process.
A report from Canadian Underwriter shows other mutual insurers in the country have no current plans to use the government’s legislation. Manitoba-based Wawanesa Mutual Insurance Company has “no plans to demutualize,” Wawanesa chief executive officer Jeff Goy said Thursday in a statement to Canadian Underwriter.
Another company with a similar outlook is Commowell Mutual Insurance Group, although the Lindsay, Ont.-based company is regulated by the Ontario government so could not demutualize anyway.
Gore, the country’s oldest mutual P&C provider has already said its board of directors voted not to demutualize.
In September, a report from ratings company A.M. Best suggested mutual providers may not see a benefit of going through a 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.