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The ESADE Alumni Insurance Club recently held a round table on the new challenges in store for the insurance market. Specifically, the speakers focused on the process of converting mutual insurance companies into public limited companies - a step recently taken by MAPFRE. They also discussed the option of continuing to operate as a mutual insurance company.

The first speaker, Ricardo Lozano, Director General for Insurance and Pension Funds of the Spanish Ministry of Economy and Finance, analysed the reasons why mutual insurance companies undergo this process. He explained that 'demutualisation' generates opportunities but can also create risks. He added that 'the market trend is to allow mutual insurance companies to chose from among other legal forms of organisation, especially that of limited company'.

In many countries, these processes are not currently regulated. 'This creates difficulties', said Mr. Lozano. 'The authorities have to reconcile these operations with the law. There are many ways to do this: by basing it on the by-laws, by creating a public limited company, or by gradually allowing the entrance of capital'. The important thing, he said, is to 'ensure that there are guarantees'.

Finally, Mr. Lozano pointed out that demutualisation 'must be reserved for financially sound institutions'. If a company is insolvent, he noted, the situation is entirely different. He added: 'The time factor is important: it can make it easier to secure financing and avoid uncertainty'.

The next speaker was Ángel Dávila, Director of Tax Consultancy for MAPFRE, a company that underwent the demutualisation process in February. Mr. Dávila recalled the factors the insurance giant considered before reaching its decision. 'Mutual insurance companies were born in a very different market context from the one we see today', he said. ?This process is adapting them to today's reality'. Mr. Dávila explained that today's insurance companies must face challenges such as open market competition and acquisitions to increase in size. He noted that 'mutualisation remains a useful option for some companies'.

Turning to the specific case of MAPFRE, Mr. Dávila explained that the demutualisation process was the result of a series of factors: the institution's identification with the situation of most mutual insurance companies, the need for business and asset-related growth, and the ability to easily secure financing 'in order to penetrate international markets'.

Next, Luigi Lubelli, Financial Director of MAPFRE, took the floor to explain the mutualisation operation in greater detail. The reorganisation process announced in May 2006 called for a structure that clearly separated property from business management.

Mr. Lubelli listed several advantages to this approach, including 'more effective management, better corporate governance and a better position for external partners'. He added that the process also makes 'institutions more attractive in the market and gives them financial strength and flexibility'.

The next speaker, José Boada, President of Pelayo Mutua de Seguros y Reaseguros and President of the UNESPA Committee on Mutual Insurance Companies and Social Welfare Organisations, explained the advantages and disadvantages of mutual insurance companies in today's market. The advantages, he said, include 'specialisation, asymmetric information and long-term vision', while the disadvantages include difficulties securing financing and investment in order to carry out corporate transactions and increase professionalism and transparency.

The following was the conclusion of Mr. Boada's analysis of the demutualisation process: 'Size does not guarantee succes'. He added: 'There is no ideal model for undertaking an operation of this magnitude. Everything depends on the circumstances at the time'. He offered a specific example from his experience at Pelayo: 'The mutual insurance company model works for us'.

The last speaker was Fernando Cuatrecasas, General Manager of Sabadell Grup Assegurador. Mr. Cuatrecasas discussed the experience of his organisation, a mutual insurance company that opted to become a public limited company. He explained that 'a company's business model and size are more important determining factors than the legal form of organisation'. He also pointed out that both mutual insurance companies and public limited companies are 'highly efficient models with good prospects for the future'. Mr. Cuatrecasas concluded with the following reflection: 'Choosing the right path depends on the situation of each company and the legal framework'.

Programme:

At this session, we will debate the future of mutual insurance companies as they face the new challenges of the insurance market.

Most companies have adopted one of two positions: 

• Some have opted to continue operating as mutual insurance companies. This sets them apart in the eyes of customers and mediators. 
• Others have opted to become public limited companies.

6.45 pm Reception and coffee

7.00 pm  Welcome
Francesc Rabassa Montesinos, President of the ESADE Alumni Insurance Club

7.10 pm Lectures:

Ricardo Lozano Aragüés, Director General for Insurance and Pension Funds, Spanish Ministry of Economy and Finance

Ángel Dávila Bermejo, Director of Assessoria Fiscal, Grupo MAPFRE. Vice Secretary of the Board of Directors of MAPFRE S.A.

Luigi Lubelli, Financer Manager of MAPFRE S.A.

José Boada Bravo, President of Pelayo Mutua de Seguros y Reaseguros. President of the Comisión de Mutuas de Seguros y Entidades de Previsión Social de UNESPA.

Fernando Cuatrecasas Cuatrecasas, General Manager of Sabadell Grup Assegurador

8.30 pm Round table: The Future of Mutual Insurance Companies
Debate open to speakers and members of the audience

Moderator:
José Ordeig Ribot, General Manager of Mutua de Propietarios

Date, time and venue:
Tuesday, 29th May 2007
6.45 to 9.00 pm
ESADE - ESADEFORUM
Av. Pedralbes 60-62, Barcelona

Limited places.

For more information:
ESADE Alumni
Tel: 902 420 020

Collaborator: