Hi I am currently reading the FSA paper titled "Mutuality and with-profit funds: a way forward". Under the section on 'Who should read this paper' it states: " ... With-profit policyholders in mutual with-profits funds, whether or not they are members of the mutual that owns the fund, may find themselves affected. ... " Can someone explain to me (with examples) under what circumstances the policyholders will not be members of the mutual that owns the fund?
The Articles of Association of an insurer will describe how the surpluses will be shared out between the members and in what circumstances. It's not necessarily the case that there will be a 1-1 correspondence between members and with-profits policyholders. Example 1: Some non-profit policyholders might be members of the mutual and so be eligible for a windfall payment on restructure of the company, eg demutualisation. Example 2: Some UWP policyholders might receive just a smoothed investment return on their fund and not be members of the mutual. In this case, the insurance risk would be borne by other WP policyholders who are members.
