Discretionary Trusts & Mutuals


Discretionary trusts and mutuals are two different routes towards the same goal: creating a joint fund to share financial risks between members of a group

What is a discretionary trust?

A discretionary trust is a risk sharing arrangement between a group of people or organisations, often supported by insurance.

The members make contributions to a fund, which is held in a designated bank account and managed by a trustee. This fund exists to pay for the majority of everyday losses. Insurance is often purchased as an additional layer of protection, to cover extraordinary losses above a certain level.

Howden helps trustees create and manage trusts optimally, using actuarial data and experienced risk managers.

We can provide:
  • Independently administered, ASIC licensed trust arrangement
  • Responsive, expert claims team
  • A system of rewards for good risk management
  • Competitive terms, with stable costs

What is a mutual?

A mutual is a non-profit company owned wholly by its members and limited by guarantee. Its purpose is to provide financial protection to members facing losses, similar to what a discretionary trust does.  

Rather than a trustee, each mutual has an appointed board, which must consider members’ claims fairly, consistently and in the member’s interests.

As it is a non-profit, financial contributions can be kept to a minimum level, and in years of surplus, profits will be reinvested for the good of the members.

A cost effective way for a buying group to operate

A mutual can be a cost-effective way to manage risk. If a mutual seeks to engage the insurance markets to add an extra layer of protection, it will have significant pooled buying power and a strong collective bargaining position.

In a well-run mutual, there is often a strong community feel, with a significant sharing of learning and best practice.

Howden can help with:
  • Day-to-day management
  • Claims management
  • Industry-specific policy wordings to suit your members
  • Risk management and communications initiatives

Types of risks covered by discretionary trusts and mutuals

  • Business risks
  • Personal Accident
  • Buildings and Contents
  • Loss of Income
  • Liability
  • Machinery and Equipment
  • Motor vehicles

Types of organisations that use discretionary funds and mutuals

  • Professional associations
  • Not-for-Profit organisations
  • Sporting groups
  • Buying groups
  • Corporate clients

    Why choose a discretionary trust or mutual? 

    More control

    One of the key aspects of a discretionary trust mutual is the trustee/board can choose to pay claims, that, were the risks under the remit of a traditional insurance policy, the insurer might reject. This cuts both ways, the trustee or board is free to reject claims on a discretionary basis too.

    Organisations have a higher level of control – for claims below the insurance layer, the trustee/board is in the final decision maker.

    Broad terms

    You set the terms, often beyond the scope of traditional insurance. Terms can be tailored to different members/ membership levels.

    Benefit from surplus proceeds

    There may be years with low claims and thus, surplus proceeds. Members can benefit from this by reinvesting, perhaps in cost control exercises or risk management/education initiatives.

    Discretionary Trusts FAQs


    Payment of the agreed policy premium is made at the commencement of the policy period. The policy coverage is stipulated in the agreed policy schedule and wording. In the event of an insured claim under the policy, the insurer will indemnify you up to the agreed policy sums insured and in line with the policy coverage outlined in the policy wording.

    There is no return of funds from the insurer at the end of the policy period regardless of whether you have claimed under the policy.


    Payment of an agreed contribution is made at the commencement of the Trust period. Part of this contribution is held in Trust and used to make payments to meet claims. Part of this contribution is also used to purchase insurance to fully protect members in the event the Trust Funds are either fully eroded by claims during the Trust period, or if a claim exceeds the agreed Single Event Limit.

    Claims payments from the Trust are made by the Trustee on a discretionary basis for the benefit of the Trust Members. A claim that goes through to the Insurer will be considered in conjunction with the agreed policy schedule and wording.

    At the end of the Trust period, any monies leftover are used for the benefit of the Trust Members and not retained by the Insurer as profit.

    The Trust purchases insurance to sit over the top of the Trust’s limits. Your broker can provide a standard Certificate of Currency on broker or insurer letterhead for you to provide to your financier.

    Not specifically. Your broker and the Trust office will work with your organisation to determine if the Trust is a suitable and viable model based on a number of factors including potential financial benefit, flexibility and responsiveness.

    The Trust can be used for any type of insurance where there is no legal act in place that restricts who can provide cover.
    Additionally, as the Trust is discretionary in nature, it can consider other risks faced that may not be covered by traditional insurance policies.

    There does need to be an appropriate scale opportunity for a Trust. There is no simple rule here, however, generally, there would need to be a premium pool exceeding $200,000. This will be heavily dependent on the risk profile and exposure. 

    We would suggest speaking with our team who can provide further advice and insight into this.

    When you have a loss, you can either contact your Howden broker or your designated Trust Claims Manager at [email protected] or via our hotline: 1300 904 506.
    If the claim is below your individual excess level, then there are no grounds for claims lodgement and you will need to pay the amount of the loss. If the claims are above the excess, the Trust will pay up to its limits with the insurance policy covering the component of the loss above this.

    The Howden team will coordinate and advocate on your behalf in the event of a claim.

    Any claim that falls outside the relevant policy wording is referred to the Trustee for consideration. Each claim is considered on its individual merit and within the spirit of the policy wording.

    Yes. The Trustee (Alternative Risk Management Services Pty Ltd) holds an Australian Financial Services License with ASIC (License Number 530893).

    To establish the Trust, there is a $15,000 fee that includes external costs and these can be incorporated into the initial year’s costs.

    The costs of operating a Trust vary depending on a number of factors including the volume of claims. At the very early stages of the process of investigating the Trust option, we will be able to estimate these costs.

    While we are not able to provide individual tax advice, we can confirm that if you are able to claim a tax deduction for traditional insurance, you should be able to claim a tax deduction for the Trust contributions.

    We generally suggest a minimum of three (3) months from data collection. The more complex the proposal or niche the insurer appetite and capacity for a specific risk, the more time may be needed.

    We will be able to give you a more accurate indication once we have some initial details on what you are looking to cover. Our team is always available to discuss this.

    Our team are the most experienced Trust team in the market. Please do feel free to call us at any time for a discussion - our detail are below. 

    Meet the Team

    Photo of Craig Harms


    Craig Harms

    Head of Alternative Risk Management
    Photo of Craig Harms

    Craig Harms

    Head of Alternative Risk Management

    In my role, I use data to help make new and fresh ideas possible for clients

    Craig has specialised in alternative risk transfer for 21 years. Having controlled ops for more than 80 self-insurance facilities, he’s known as a leading figure in the Australian market.

    Photo of Soula Karamalis


    Soula Karamalis

    Senior Associate Alternative Risk Management
    Photo of Soula Karamalis

    Soula Karamalis

    Senior Associate Alternative Risk Management

    Soula brings over 18 years of knowledge and understanding in Alternative Risk, specialising in the operation, execution and maintenance of Discretionary Trust solutions for her clients. She has a wide range of involvement in providing related services such as self-insurance feasibility studies, analysing the risks of clients, claims management and financial oversight. Soula has had involvement in over 80 Trusts in this time across all aspects of their operation with a strong focus on building and maintaining stakeholder relationships.

    Photo of Gary Ward


    Gary Ward

    Partner Affinity
    Photo of Gary Ward

    Gary Ward

    Partner Affinity

    My goals are straightforward – to get the best possible outcome for our clients, delivered in a simple and swift manner

    Starting his broking career in 2007, Gary brings lots of hands-on experience in affinity, mid-market and SME offerings. He’s worked in various leadership roles, developing, servicing and enhancing group offerings for leading buying groups and associations, both national and international. He has particular expertise in the real estate and property industry.

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    Howden Insurance Brokers Australia
    Head Office
    Level 23
    20 Bond Street
    Sydney NSW 2000

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