As multinationals learn more about the advantages of adding employee benefits (EB) risks to their captive, many of them are asking themselves the question: ‘Where do I start?’. Adding these risks requires collaboration between many stakeholders within the company (such as the HR Director, Risk Director, Financial Director, etc.).
But other external stakeholders (such as captive managers, consulting and brokerage firms, insurance networks, regulatory authorities, etc.) also play vital roles. When you combine the complexities of navigating these relationships with the need for access to historical claims data – as well as for a centralised approach to administering an EB programme – it can be a daunting prospect.
Fortunately, EB industry experts are able to guide multinationals through the process of adding EB to a captive. Marine Charbonnier, Head of Underwriting, Captives and Facultatives , APAC & Europe - AXA XL, Pascal Prévost, Independent Risk Management Consultant and Damian Allepuz, Regional Manager Western Europe, MAXIS, have combined their expertise to analyse this topic in a new webinar. Watch the webinar below or keep scrolling to read our top four takeaways from this insightful discussion.
1. The steps to obtain a license to write EB
The panelists shared the journey for multinationals wanting to add EB to their existing non-life captive. They said that there are two steps required before applying to the regulator: the pre-study and the feasibility plan. The purpose of the pre-study is to present a business case to the management and to obtain a budget to go ahead with writing EB. To do this, it is necessary to consider the following factors.
The volume of EB claims and premiums, insurers, renewal dates, number of employees covered, pension funds, etc.
Whether it will be necessary to rely on internal and external resources (brokers, consultants, insurers).
A need to analyse data in their regulatory, social and cultural contexts.
How to gradually integrate EB programmes, starting with the easiest (life insurance).
Once the pre-study has been carried out, the feasibility study is the next step. Marine, Pascal and Damian said the key aspects of the feasability study were:
Establishing a policy migration plan, prioritising the easiest countries to generate positive results
Determining whether the employees' share can be reinsured by the captive
Obtaining approval from the Chief Financial Officer if additional capital is needed for the captive
Accommodating the initial captive protection requirement (stop loss). This is a must at the start of the captive's journey of adding life and disability programmes with large capital (for example, in France).
2. Working with the supervisory authorities
Marine Charbonnier: ‘The supervisory authorities in Europe, including in France, are increasingly demanding. They ask many questions to fully understand the case, its context and its smallest details. ‘Obtaining approval is time consuming, which is often a challenge for all stakeholders including the insurer who must be ready on time for the deployment of programmes, with the reinsurance transfer to the captive.’ The group continued to share more points that the supervisory authorities pay particular attention to:
The identity of the direct and ultimate shareholder/s, their quality and solvency.
The Board of Directors’ quality of governance, which must have the skills required to decide and control a regulated reinsurance company.
The quality of the business plan and the financial capacities given to the captive by its parent company.
3. Key success factors and obstacles
Pascal Prévost ‘It is only under the impetus of the headquarters that it will be possible to implement an EB programme that fits with the company culture. This involvement will give a lot of strength and credibility to the approach.’ To conclude, the group shared their most important considerations for employers looking to add EB to their captive:
The support of senior management is essential.
Good collaboration and distribution of roles between the different functions (HR, Finance, Risk Management, Procurement) and giving them sufficient resources is key for success.
Programmes must be examined in a local context by separating life and non-life portfolios.
Always plan for the unpredictable by focusing on objectives of control, transparency, harmonisation of benefits and improvement of employee health.
Subsidiaries must be involved during the transition period by communicating at all phases of the project and explaining the value of the captive and incentivising them to use the preferred local insurers that can be reinsured to the captive.
It’s essential to involve employees and their families when planning benefits to make sure they’re relevant and appreciated, which ultimately can help to improve the employer's reputation and help attract and retain the best workers.