London Boroughs Form First Local Mutual Insurer in 100 Years

April 2, 2007

London is a huge city. 7,500,000 million people live within its city limits and over 14 million in the greater Metropolitan area. Sometimes bigger isn’t necessarily better. That appears to be the impetus behind the formation of the first “local authority insurance mutual” in a hundred years.

Ten of London’s 29 boroughs, or city administrative areas – Brent, Camden, Croydon, Hammersmith and Fulham, Haringey, Harrow, Islington, Kingston, Lambeth and Tower Hamlets – have joined together to form the London Authorities’ Mutual Limited (LAML), which opened for business on Sunday, April 1. No, this is not an April Fool’s Day joke.

The Boroughs have been working on the project for over two years, holding numerous meetings with the UK’s Financial Services Authority (FSA), that required them to meet a number of “tough criteria.” It was established, with funding from the London Centre of Excellence, “in response to concerns about the limited number of local government insurance providers and the difficulties authorities in the capital face in achieving best value for their insurance premiums,” a bulletin from the new mutual noted. “The London boroughs of Brent and Harrow will be placing business with the company from day one while the eight other founding authorities will follow over the coming months.”

The boroughs are targeting premium reductions as high as 15 percent. At present the bulletin indicated that the market is “dominated by just three providers.” Their initiative forms part of “the government’s wider efficiency drive for local government.”

Explaining how it will work, the bulletin stated: “The business is overseen by a board of directors and subject to the regulatory regime of the FSA. Ownership of the mutual is vested in the participating authorities – there are no shareholders – and underwriting profit is retained for the benefit of the authorities as members, not third party shareholders. Its core business is property insurance, employer and public liability and acting as an intermediary for motor insurance.

“LAML also aims to raise standards of insurance practice in local authorities by recognizing good management of risk and rewarding those authorities that pursue effective risk management strategies.”

LB Croydon Borough Treasurer Nathan Elvery, who chairs the Board of Directors, commented: “LAML is without precedence and represents a fresh injection of competition in the market. It’s underpinned by a robust business platform and subject to a tough regulatory framework. I wish to express my thanks to those who have worked so tirelessly to put this in place and I am confident that it will provide an excellent service to its members.”

Ken Cole, Director of the London Centre of Excellence, added: “This is an innovative project and shows how well local authorities can work together with the aim of generating efficiencies and raising standards of practice. The key to reaping the full benefits of the mutual is participation as the more authorities that participate the greater the benefits for those participating will be. I’m sure both local government and the wider insurance industry will be watching developments closely.”

The bulletin further indicated that the LAML “is open to all 32 London boroughs, the Corporation of London and the Greater London Authority. The project has been funded by the London Centre of Excellence and led by the London Borough of Croydon.”

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