Why a mutual?
Mutual insurance companies had been used commonly in the maritime sector since the mid-nineteenth century. They provided a vehicle by which companies facing similar risks could create a collective fund to insure those risks at cost without delivering profits to outside shareholders.
PAMIA’s founding members understood that this model could be adopted by their profession, because all practitioners in the intellectual property field faced similar risks and suffered from unfair pricing by commercial insurers.
How does a mutual work ?
A mutual is a not-for-profit co-operative, a company limited by guarantee with no shareholders. A mutual is owned and controlled by its members and cannot make a profit or loss. Any surplus the mutual may make accrues to the benefit of its members. Surpluses can be used to strengthen the reserves, reduce premiums, reduce or eliminate deficits and be returned to members.
In the case of PAMIA, it has made good surpluses since it was established and has used these surpluses to build its reserves.
In common with commercial insurance companies, a mutual charges its members a premium, known as an Advance Call, at the start of each policy period. However, because a mutual cannot make a loss, it has the right to charge members additional premium, known as a Supplementary Call, if it requires additional income to pay claims or increase the reserves. A mutual’s right to levy a Supplementary Call gives its members a near guarantee that their claims will be paid, a measure of confidence they cannot have in commercial insurance companies.
In the case of PAMIA, it has never made a Supplementary Call and does not expect to have to do so.