Peter C. Young & Martin Fone discuss how risk mutuals can provide a cost-effective option for local authorities
- The Local Government Association is developing a mutual on discretionary lines for its members.
- Traditional risk financing mutuals for local authorities in the UK stopped after a 2009 court case.
- However, a closer look suggests they are permissable and could be an important risk management tool for local authorities.
For nearly 80 years almost all UK local authorities procured insurance through a risk mutual, Municipal Mutual Insurance Limited (MMI). Owing to several factors, Municipal Mutual ceased trading in 1992. In response, a commercial market emerged; one that proved to have chronic issues of unavailability, unaffordability, and unacceptable terms and conditions.
Partly in response to market instability, in April 2007 nine London Boroughs resurrected the mutual idea with the London Authorities’ Mutual Limited (LAML) and in August of that year nine Fire and Rescue Authorities followed suit, creating the Fire and Rescue Authorities’ Mutual Limited (FRAML).
LAML and FRAML were established as regulated and authorised mutual insurance companies owned by the
