KBRA releases research noting a resurgence in reciprocal formations over the last 24 months. In Florida alone, the Florida Office of Insurance Regulation approved four newly created reciprocals in April 2024. While there are many differences relative to stock insurance companies, the key distinction for mutuals and reciprocals is that they are owned by their policyholders or subscribers. KBRA believes that certain structural aspects of these organizational formats provide some unique advantages and are driving the recent uptick in reciprocal popularity. However, within the context of the specific strategies and management of individual companies, these same structural considerations can also create challenges.

Key Takeaways

• Shared structural features of mutuals and reciprocals can foster credit positives but can also be a source of weakness if not properly managed.
• Certain organizational aspects of reciprocals provide incremental financial performance benefits, particularly for new market entrants, which KBRA believes will continue to bolster the renewed interest in these specialized forms of insurance organization.
• The inherent structural aspects of mutuals and reciprocals provide a helpful launchpad to assess many other key credit considerations that span both organization types and underpin a financial strength rating outcome.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1006038

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