Modernising legislation for mutual insurers and friendly societies

Modernising legislation for mutual insurers and friendly societies

16 June, 2022

In the wake of the (failed) demutualisation vote by LV= and with the help of the APPG for Mutuals, AFM has pressed for a range of legislative changes that would give mutual insurers and friendly societies the capacity to compete on equal terms with their non-mutual competitors, and to remove some of the past incentives for demutualisation.

On 15 June, the House of Commons had a First Reading of a Private Members Bill (The Co-operatives, Mutuals and Friendly Societies Bill) which seeks to deliver some important changes to the legislation affecting the mutual sector.

Sponsored by Sir Mark Hendrick MP, with the support of AFM and Cooperatives UK, the Bill will cover a range of provisions for the mutual sector (along with others for cooperatives):

  • to update the Friendly Societies Act 1992, for which our starting point is the extensive submission we made to Treasury last year (copy available on request);
  • to address the problem relating to the tax treatment of any mutual insurer or friendly society that wishes to issue Mutual Deferred Shares; and
  • to permit the capital surplus of mutuals and friendly societies to be non-distributable (ie to seek to change the articles/ constitution to remove the possibility of the inherited estate being distributed in the event of a demutualisation).

Martin Shaw, AFM’s CEO, comments:

“Mutuals and Cooperatives diligently serve many millions in the UK, including many of the most hard-pressed in our population.  Yet they do this most of the time with one hand tied behind their back, forced to operate within outmoded legislation.  This important Bill will help mutual insurers, friendly societies and cooperatives compete on a more even playing field.

We are very grateful to Sir Mark Hendrick for bringing forward this Bill, and expect that as a result mutuals will be able to operate more effectively, and even more people will be able to benefit from being part of a customer-owned organisation, which only focuses on their best interests.”

The Second Reading of the Bill is planned to be on Friday 28 October (this is the first point at which a detailed case for changes to the law is made and debated in parliament).

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