09 March 2017
Reporter: Becky Butcher
Increase in captive use to limit EB cost
Multinational pooling and captives are being increasingly used to limit the cost of insurable employee benefits globally, according to research by Willis Towers Watson.

The research showed that the rising cost of employee benefits around the world is prompting more international companies to set up multinational pooling and employee benefit captive arrangements in order to improve the performance of their insurable employee benefit plans.

It suggested that the primary objective for setting up such arrangements is usually to lower premium costs or to reduce cost increases to below market inflationary levels.

Pro-actively managed multinational pools and employee benefit captives can generate savings of over 14 percent and 25 percent, respectively, on insured benefit costs, according to the research.

It also found that some captive arrangements delivered even higher returns, because companies actively discounted their premiums up-front before reinsuring them to their captives.

Roger Beech, director of global services and solutions at Willis Towers Watson said: “The increasing costs of insurable employee benefits are hitting the radar of senior executives more regularly, with the result that there is greater urgency to understand and manage the drivers of these costs and their growth.”

He added: “The annual costs for insurable employee benefits can easily exceed $25 million for a company with 20,000 employees around the world, so the use of multinational pooling and employee benefit captives can deliver significant cost savings for many companies. As multinational companies seek out cost management opportunities, approaches to create a competitive advantage, taking a proactive and considered approach to the management of insurable benefits results in relatively easy savings.”

In 2016, in terms of location for multinational pooling performance, Sweden produced the largest savings as a percentage of total premium pooled, 41 percent, while contracts in Canada were the worst performances with average returns of 16 percent.

For employee benefits captives, variations in profitability were even wider, with Japan producing the largest returns at 55 percent, while Ireland only gaining returns of 24 percent.

Beech commented: “The findings do not mean that companies should automatically include every benefit plan in Sweden or Japan, or exclude every contract in Canada or Ireland. Rather they should conduct due diligence and consider their own objectives, claims experience, premium rates, network retention levels and other factors before adding or continuing to include any contract in their pool or captive.”

More news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Clyde & Co continues to expand office space in the US
25 July 2017 | Los Angeles | Reporter: Becky Butcher
Clyde & Co has opened a new office in Los Angeles, marking the company’s ninth US office
Michael Burns to receive Fred Reiss award
24 July 2017 | Hamilton | Reporter: Becky Butcher
Michael Burns, a Bermudian corporate lawyer, has been chosen to receive the second Fred Reiss Lifetime Achievement Award
Excellent ratings for Nuclear Electric Insurance
24 July 2017 | Oldwick | Reporter: Becky Butcher
A.M. Best has affirmed the financial strength rating of “A (Excellent)” and the long-term issuer credit rating of “a+” of Nuclear Electric Insurance Limited
Modelling needed for cyber ILS market development
24 July 2017 | Zurich | Reporter: Katherine Brown
Better modelling and pricing metrics are needed before the insurance-linked securities (ILS) marketplace is introduced to cyber risk transfer, Florian Heimann of AIR Worldwide has said
OECD releases additional guidance on CbC reporting
21 July 2017 | Brussels | Reporter: Becky Butcher
The Organisation for Economic Co-operation and Development (OECD) has provided further guidance on the implementation of country-by-country (CbC) reporting under its framework on base erosion and profit shifting (BEPS) initiative
UK government sets out new ILS framework
21 July 2017 | London | Reporter: Becky Butcher
The UK Treasury has published new rules for insurance-linked securities (ILS) as the country aims to grab a share of the rapidly growing market
Arkansas captive tweaks a 'positive step forward', say lawyers
21 July 2017 | Little Rock | Reporter: Becky Butcher
Recent modifications to the captive insurance law in Arkansas are “a positive move forward to support and grow” the industry in the state