The rising cost of employee benefits is prompting more and more international companies to set up multinational pooling and employee benefit captive arrangements to improve the performance of their insurable employee benefit plans, according to the Multinational Pooling and Benefit Captives Research Report compiled by Willis Towers Watson.
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“Captive insurers are wholly owned and operated as subsidiaries of their parent companies,” notes a 2015 Towers Watson article written before the merger with Willis. “In the context of employee benefits, captive insurers act as reinsurer to a local fronting insurer, or network of insurers.”
The new research has created the largest database of its type on the performance of multinational pooling and employee benefit captive arrangements.
It revealed average dividend returns for multinational pools of 6%, with top quartile results producing dividends of over 14%. For employee benefit captives, the savings can be even greater, with median surpluses of 15% and the top quartile producing 25% or more. Some captive arrangements delivered even higher returns because companies actively discounted their premiums up front before reinsuring them to their captives.
“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,” says Roger Beech, director, Global Services and Solutions, Willis Towers Watson, quoted in a press release. “As multinationals seek cost management opportunities, taking a proactive and considered approach to the management of insurable benefits can lead to relatively easy savings.”