Economical Insurance, which recently won
P&C insurer of the year at the Insurance Business Awards, is on the road to demutualizing after 145 years as a mutual insurance company.
The process has been a long one – Economical’s board made the initial decision to become a public company back in 2010 – but the next stage, a hearing on appointing policyholder committee members, is set for this coming January, and an IPO can reasonably be expected at sometime early in 2018.
“The board thought hard about the demutualization step,” David Wilson, chair of Economical’s special committee on demutualization, told
Insurance Business.
The key drivers behind the decision are to improve financial stability and flexibility, and to best position the company in an industry that is increasingly consolidating.
“The big are getting bigger,” Wilson said of the stream of acquisitions in the last few years.
While some niche players will survive, the company’s board “wanted Economical to be a consolidator and not a consolidatee, not to be standing occupying the dreaded middle ground as everybody around them consolidated,” Wilson explained.
By strengthening financial stability, the move to become a public company will make sure Economical is better placed to be able to respond in the event of catastrophe-related insurance claims or extreme market events – which Canada is no stranger to.
But what about the practical effects on Economical’s broker partners?
“Demutualization will actually make us a stronger company,” Wilson said.
While preparing for demutualization for “quite some time” in terms of public company readiness, governance and reporting structures, the insurer has been continuing to grow its broker business.
“In fact, we have a goal to increase our broker business by a full 25% in the coming years, so we’re not standing still,” he said.
“The broker channel has been our main sales distribution arm for 145 years,” Wilson explained, and there are no plans for that to change.
In demutualizing, the company says it hopes to create a publicly traded P&C company with very strong footings, that is still “deeply rooted in its broker channel.”
“We are certainly growing our broker business, and we’re communicating that to our broker partners, such that they have confidence in wanting to continue to do business with us as a mutual company today, but also as a very strong publicly traded company when we do go through the IPO process.”
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