Mutually Protected is an extension of some tried and tested ideas for protecting businesses that have been around for more than 100 years. These are based upon insurance and indemnity mutual companies which, among others, have served the medical and shipping sectors and continue to prosper in modern times.
The concept of mutual companies has been around for more than 200 years. Lloyd’s of London is a mutual organisation. In the nineteenth century, mutuals flourished: building societies, insurance companies, protection and indemnity (P&I) clubs and medical indemnity being at the forefront. The P&I clubs were established by shipowners and some have continued to the present day. Nearly every ship-owner, today, is a member of a P&I club.
There are some clear advantages of being a member of a mutual. First, as it is not an insurance company, it is not regulated as an insurance business with consequent cost and administrative savings. Secondly, there is no need to write a precise policy document detailing the scope and extent of cover: a mutual can look at any claim and decide to deal with it as it thinks fit, even if it is a claim for an event that was never foreseen in the first place. Thirdly, as it is not an insurer and not obliged to pay out the full amount of each and every claim, there is no need to maintain minimum levels of capitalisation and liquidity. This means that an indemnity company can be established with less capital than an insurer and can gradually grow its capital base until, as with so many indemnity companies, it becomes as strong as an insurer. It also provides more flexibility when considering its investment policy as it is not confined to the liquidity requirements of an insurer: many insurance companies are forced to invest in “poor” investments due to the liquidity requirements they need to follow.
From the concept of mutual companies, the idea of self-insuring through indemnity companies and, later, captive insurance companies took root. The legal and medical professions also saw, before the turn of the twentieth century, the advantages of mutual indemnity companies and the Medical Defence Union and several others have survived and grown right up to the present day.