This guide was written for use by supervisors and regulators of insurance undertakings to help them understand the specifics of mutual insurance. This guide does not set out a methodology for regulation, but aims to provide a clear and comprehensive description of the structure, governance and purpose of mutual insurance undertakings.

The aim is to deliver a better understanding of mutual insurers by regulators, to help ensure that rule-making does not create barriers to effective competition, and to stimulate constructive dialogue between supervisors and mutual insurers. Ultimately, it is hoped that this will create a stronger alignment between the goals of regulation, supervision and mutual insurance, including the proportionate application of rules and standards. 

The pooling, sharing or mutualisation of risk is the principle behind the function of any insurance company; it involves spreading individual risks between a group of people or organizations. Insurance thereby began as a mutual concept, with the insureds also being the owners of the insurance undertaking.

Mutual organisations gained importance in the 19th and 20th century throughout Europe. Nowadays, mutual insurers exist in most regions of the world in a more-or-less institutionalised form and are commonly known as self-help groups, friendly societies, mutual insurance companies, industrial and provident societies, mutual (or social) benefit societies, fraternal societies, insurance cooperatives, etc.

In most cases, mutual insurers were set up by socio-economic groups (such as farmers, fishermen, craftsmen, teachers) in the absence of, or as an alternative to, mainstream insurance, with the main purpose of providing cover to their member-owners in exchange for affordable premiums.

In some parts of the world therefore, mutual insurers, as well as associations, cooperatives and foundations, form a part of the wider social enterprise sector. This sector holds significant market share in financial services (banking and insurance), agriculture, health and pensions, sport and culture, and has certain common features in each:

• primacy of the individual and the social objective over capital
• democratic control by the membership
• combining the interests of members, users and the general good (society)
• defence and application of the principle of solidarity and responsibility
• reinvestment of surplus to carry out sustainable development objectives and the provision of services to members or for the general good.