The most popular lines of coverage to put through an employee benefit captive are group life and disability, although attempts are being made to broaden their horizons, heard attendees of the Captive Insurance Companies Association (CICA) International Conference.
Peter Bandarenko, a senior consultant and head of new market development at Spring Consulting Group, used his panel session to analyse the results of a survey that his firm has conducted to find out how clients such as Coca Cola and Deutsche Bank are using their employee benefit captives.
According to Bandarenko, 57 percent respondents are considering the inclusion additional coverage lines in their captives. The most popular was cyber risk. Other lines included product warranty, terrorism risk, reputation risk, product recall and credit risk.
This follows results that showed that 86 percent of surveyed companies are meeting their financial objectives with their employee benefit captives, which are allowing them to regroup carrier underwriting profits and introduce third-party risks to obtain better distribution and drive tax efficiencies.
The remaining 14 percent of respondents who didn’t meet their objectives did so for various reasons, including “merger and acquisition activity fundamentally changing [their] captive strategy”.
Bandarenko pinpointed the biggest challenges to expanding the use of an employe benefit captive, including “regulatory hurdles, the US Department of Labor process [for obtaining coverage approval], and fronting/insurance carrier reluctance”.
He added that “building organisational alignment between risk and HR” remains a problem, as does “obtaining [the] approval of senior leadership for adding employee benefits to your captive”.
