The establishment of LAML
(Society of London Treasurers/London Insurance Officers' Group)
LB Croydon has acted as lead authority for the project which had funding approved by the LCE Management Board 16 March 2006.
A feasibility study carried out at the end of 2005, and participated in by 28 authorities, established that a mutual insurance company owned by London authorities could generate significant premium savings and, in the medium term, generate a substantial operating surplus for its members.
Ten authorities participated in establishing LAML during the latter part of 2006 and the start of 2007 and as from 1 April 2007 we are delighted to announce that the first authorities, the London Boroughs of Brent & Harrow have placed their insurances through the London Authorities' Mutual Ltd.
The London Authorities' Mutual as a Guaranteed Indemnity Mutual, is an authorised insurer and is regulated by the FSA. The company is offering a full range of corporate property and liability covers to its members and offers real value for money for the public purse meeting efficiency savings through partnership working.
Key Points
- Financial models using conservative loss assumptions shows that the structure is financially robust in all loss scenarios and will generate a significant surplus over the first five years of trading.
- Annual premiums reduced by an up front 15% saving.
- Cover offered by the mutual is as a minimum at least on a par with that currently enjoyed and in certain areas offers significant enhancement.
- The establishment of and participation in a mutual will make a contribution to the authorities' target of cost efficiencies (Gershon) and is in line with the National Procurement Strategy of collaborating in the purchase of services.
- 'A' (Standard & Poor) rated reinsurers provide the level of reinsurance protection the mutual requires.
- LAML is subject to the regulatory regime of the Financial Services Authority in the same way as the commercial insurance companies used by the public sector are.
- Ownership of LAML is vested in the participating authorities - LAML is a company limited by guarantee with no shareholders.
- LAML is tax efficient - other than the requirement to charge Insurance Premium Tax on premiums levied on its members, the only tax liability is on investment income earned by LAML.
- Counsel's opinion confirmed that ability to establish and own a mutual (LAML) is within the powers available to local authorities.
- Underwriting profit is retained for the benefit of the members, not third party shareholders.
LAML will give premium recognition for good management of insurable risk and will thus reward those authorities who are pursuing effective risk management strategies.