We are delighted to be able to provide an update on progress towards the launch of Local Government Mutual, which aims to offer a cost-effective alternative to traditional insurance.
We know local government is always looking for innovations that can improve the ways in which councils serve our communities within ever tighter budgets.
The LGA joined a group of innovative councils to establish the new Local Government Mutual (LGM). It is drawing on best practice from other mutuals and will offer a cost-effective alternative to traditional insurance. It will use local government capabilities and resources more effectively to manage and, where possible, reduce the cost of risk while continuing to work with the insurance market to procure cost-effective risk transfer cover for large losses.
“I believe the mutual will make a valuable contribution to sector-wide efficiencies and financial stability.
Cllr Richard Watts, Chair of the LGA’s Resources Board
LGM will be governed and led by its local authority members, and is legally obliged to act in their best interests. It will support improved risk management by using tried and tested sector-led improvement methods to help reduce the number and cost of claims, and it will be the local authority members themselves who reap the financial benefits – not private shareholders.
A mutual is owned by its members who have control over how it is run. The LGM will be a hybrid discretionary mutual, which means there are two levels of protection:
• The mutual pools sufficient contributions from its members to cover the cost of the low-level, expected losses.
• A programme of insurance protection is arranged to protect against larger unexpected losses and accumulations of losses.
The mutual board can also use its discretion to approve claims that fall outside a member’s cover if it considers this to be appropriate.
The mutual is managed by LGM Management Services Limited, a joint venture between LGA Commercial Services and Regis Mutual Management. They are now putting in place the mutual’s strategy and operations for handling claims, pricing members’ contributions and have initiated the procurement for the mutual’s ‘wrap-around’ insurance to protect against additional costs. They will ensure compliance with procurement regulations and other legal and regulatory requirements.
Cllr Richard Watts, Chair of the LGA’s Resources Board, said: “The LGA has been keen to support a new mutual as it offers the prospect of affordable, high-quality risk transfer and risk management through a mutual structure for the benefit of local government. I believe it will make a valuable contribution to sector-wide efficiencies and financial stability.”
Cllr Andrew Western, Leader of Trafford Council and Founding Member of the Mutual, said: “Trafford Council is delighted to be a founding member of the mutual. It offers an opportunity for us to be at the forefront of an innovation that could potentially save money over time and improve the way in which we manage the complex risks inherent in local government business.”
Cllr Matthew Lee, Leader of South Kesteven Council and Founding Member, said: “Mutuals have worked for hundreds of years all over the world. This is a sensible way to help local government take greater control over our own risks and finances, learning from experience in the UK and abroad, bringing additional choice into the market.”