Mutual insurers are in a prime position to capitalize on changes in the traditional reinsurance market, according to Willis Re, the reinsurance broking arm of Willis Group Holdings.

The recent 1st View April 2013 Renewals Report released by Willis Re found that changing distribution models coupled with a flood of alternative capital has left many reinsurers concerned over both their existing portfolios and their access to future growth.

In a statement released today as a follow-up to last week’s report, Willis Re executives comment that mutual insurers should be rewarded for their loyalty by reinsurers, who are seeing larger stock insurers decrease their use of traditional reinsurance and increase their utilization of nontraditional alternative reinsurance capacity.

Willis Re believes this situation provides mutual insurers with the perfect opportunity to strengthen their existing relationships with traditional reinsurers and to forge new ones.

Robin Swindell, Executive Vice President of Willis Re, commented: “Traditional reinsurers are very aware that while some larger commercial buyers are reducing their use of reinsurance in this phase of the reinsurance cycle, mutual buyers value long-term sustainable relationships throughout the entire cycle.

“This is the perfect time for mutuals to demonstrate that they are reinsurers’ preferred customers.”

Mutual insurers have a unique ownership structure where policyholders, not external shareholders, are the ultimate owners. This means they have less access to other forms of capital, and as a result, mutual insurers are often heavily reliant on reinsurance to provide them with additional capital to deal with catastrophes and large losses.

John Haydon, Executive Vice President of Willis Re, commented: “Mutual insurers are in business for their members for the long-term and should receive the recognition they deserve from reinsurers. Like mutuals themselves, reinsurers should never leave their loyal customers in the lurch.”

John Cavanagh, Chief Executive Officer of Willis Re, commented: “Seismic changes occurring in the traditional reinsurance market are clearly favorable for mutual insurers. Willis Re has always been a strong advocate of the long-term business models characterized by mutual insurers, and will continue to provide analytical and transactional support to our clients in this important market.”

In the 1^St View report last week, Willis Re reported that a wave of new capital—amounting to $35 billion—is currently flowing into the global reinsurance market, characterizing the capital market’s activity as a “direct threat” to the existing portfolios of traditional reinsurers.

The threat has pushed reinsurers to consider changes in their business models, the report said. (See related article, “Capital Wave Flows Into Re Market; Reinsurers Forced To Change.”) In the opening letter of the Wills report, Peter Hearn, Chairman of Willis Re, wrote: “While some reinsurers are considering how to respond, others are moving ahead with the development of third-party capital management propositions to offer their own skills and platforms as fund managers.”

Hearn added that the new capital is likely to have a significant impact on any post-event response which may occur after a major loss, noting that the traditional model—of fresh capital coming into the market has been through the formation of new companies—is being replaced by a new model of fast capital flowing in through less permanent structures.

Aon Benfield offered similar assessments in a report on April 1 reinsurance renewals, described in a related CM article, “Alternative Re Capital Wave Lowering Traditional Re Prices Too.”