EMC and Mutual Reinsurance Bureau - International Cooperative ...

EMC and MRB
Ron Hallenbeck & Tim Dorr

Employers Mutual Casualty Company
Employers Mutual
Casualty Company
was formed in 1911 to
write Workers
Compensation
Coverage for the Iowa
Manufacturers
Association

EMC Insurance Building or
Vodka Bottle

Characteristics of Companies with
Long Histories (according to the III)
One in eight Property
Casualty Insurance
companies are over
100 years old
Characteristics
• Business model highly
focused. True to core
business
• Mutual or Cooperative
type organization
• Communal Interest –work
for common good

Characteristics of Companies with
Long Histories (according to the III)
62.4% of 100-year
old insurers
are mutuals
Characteristics
• Tend to grow slowly
• Tend to be smaller size
companies
• Tend to not be the most
profitable

EMC Assumed Reinsurance and MRB
• EMC started in the assumed reinsurance
business in the 1950s with our
participation in MRB and our long-standing
relationship with another Iowa Company,
Pharmacists Mutual (formerly known as
Druggist Mutual)
• MRB is largely responsible for EMC
having enjoyed such longevity in the
reinsurance business

Mutual Reinsurance Bureau (MRB)
The Mutual
Reinsurance Bureau
was formed in 1922
and is located in
Cherry Valley, Illinois.
Cherry Valley is 72
miles (116 KM) west
of Chicago

Mutual Reinsurance Bureau
MRB is currently composed of
four Assuming Companies
(ACOs). They are the mutual
insurers of:
• Farm Bureau of Michigan
• Kentucky Farm Bureau
• Motorist Mutual
• Employers Mutual Casualty
Company (EMC)
A deposit of $266,000 is
required to become an ACO.
That deposit is not returned
until all unpaid liabilities are
extinguished.

Mutual Reinsurance Bureau (MRB)
MRB is an unincorporated
Joint Underwriting
Association licensed in
the state of Illinois. Tim
Dorr is the Attorney in
Fact and President of
MRB. Tim reports to the
MRB Board composed of
Assuming Company
representatives.
Structure

MRB Structure
• Unlike a typical lineslip where obligations
are several, MRB assuming companies
are jointly liable for the risks they assume.
• Joint Liability means that the combined
capitalization of all the ACOs
(approximately $3 billion) can be
considered as one large balance sheet to
back the assumed obligations of MRB.

MRB structure
• MRB is not a charitable organization. It is
in business to make money for its ACOs
but it does pride itself in long-term
relationships.
• MRB’s longest ceding company
relationship is with Church Mutual
Insurance Company. They have been with
MRB since 1923.

MRB
• MRB is staffed by 17 individuals who offer
underwriting, claims and accounting
service to their ceding company clients.
• MRB reports experience to the ACOs on a
monthly basis, including estimates for
Incurred But Not Reported Loss(IBNR).

Regional Reciprocal Catastrophe Pool
(RRCP)
• MRB is a sponsoring organization and risk
bearer for the RRCP.
• The RRCP is a reciprocal pool designed to
provide coverage for each member’s top cat
layer on a “no profit load” basis. RRCP
members cede to(buy) and assume from
(sell) each other.
• No profit load means that only the expected
long term loss cost is charged. If there is
more premium than loss, the profit is returned
to the members.

RRCP
• The RRCP currently has 51 members. The idea is that most
mutual insurers have their own unique peak exposure territory
for which they buy their top layer of cat XL reinsurance
coverage.
• The RRCP layer must attach excess of the modeled 100 year
all perils, all zones return time loss.
• MRB limits the pool modeled 1 in 250 year all perils all zones
loss to $160 million…… or 4 times the maximum per
occurrence, per client capacity of $40 million.
• So far, premium has always exceeded loss amounts and has
resulted in return premium to pool members every year since
the pool inception in 1994.

RRCP
• The RRCP has returned $113 million to
participants since the 1994 start up.
• The RRCP provides capacity up to $40,000,000
per occurrence, per client… but it must be a top
layer and it must attach above the modeled 1 in
100 year loss.
• The RRCP is a way for smaller (generally mutual
companies) to “manufacture” their own capacity
at very low costs rather than utilizing “for profit”
venues for capacity needs.

RRCP
• MRB utilizes AIR Catrader for modeling/pricing but
is open to input from other models in order to
produce a “blended” result.
• Using one base model, however, provides
important consistent relativity between programs.
• Pricing varies from 1.0% ROL to 4% ROL
depending on the perceived loss potential (and
technical modeling analysis results) of the layer
structure under consideration.

RRCP
• One reinstatement of the Cat limit is provided at no
additional charge.
• Loss covered by the RRCP can, however, affect
renewal pricing in subsequent years after a loss.
• Care must be exercised not to expose the pool to an
aggregation of top layer losses….. so spread of peak
exposures is key.
• MRB charges an administrative fee of 10% that covers
the credit risk of the MRB ACO’s and MRB’s own
internal expenses.

Future of the RRCP
• Future growth in the RRCP will come from
new business outside the Northeast U.S.
• Currently Canada is the only non-U.S.
territory approved by the members for
participation

MRB