In the face of a global health crisis and a hardening insurance market, large companies are looking for new solutions to control their costs and manage their risks.
Faced with economic volatility and the emergence of new risks, captives have come a trusted, flexible and efficient alternative to finance insurance programmes for risk managers.
As the many benefits of a captive are now being further recognised, businesses are thinking more about using them and looking to diversify their risk with new lines of business. Employee benefits (EB) risks like life, disability and medical insurance – which are critical for caring for employees – are a great example of new lines being added to captives.
We were delighted to host a roundtable with AXA XL and 2RS to discuss this important topic and much more.
Watch the roundtable in the player below or, if you’re not fluent in French, keep scrolling to read our two key takeaways from Damian Allepuz, Regional Manager for Western Europe at MAXIS GBN and Marine Charbonnier, Head of Global Programmes and Captives - Europe at AXA XL.
Are there new benefits that employers are looking to offer to their employees?
Damian Allepuz: Companies are considering the social benefits of a more equitable working environment. Employee benefits, both traditional insured and lifestyle benefits, can play a vital role in making all workers feel valued and creating a culture where everyone can thrive, no matter their background.
Employers are therefore addressing the issue of inclusion and diversity in the workplace and the role that benefits can play in developing an all-inclusive culture. Inclusion and diversity in the workplace is obviously about more than gender, employers must also take into account ethnicity, disability, sexual orientation, educational background and age. An inclusive workplace in which employee needs are listened to and where employees feel valued also has a positive impact on talent retention. Organisations that promote values of inclusion and have a diverse workforce also tend to appeal to a wider customer base.
Many employers are offering options that ten years ago would have been unthinkable to improve inclusion and diversity. These include benefits like mental health, fertility, and transgender coverage, among others.
Some also offer employees greater choice and flexibility at different stages in their lives – this allows employees to change their benefits according to their current needs and expectations, ensuring inclusion at all points in their career.
A captive is a good solution for including conditions that may not be part of local insurance market practice or for which there may not be a “plug and play” provider. Of course, local compliance is important in this case, but captives can offer businesses a great way to extend the benefits that their employees need.
What are the main reasons for adding employee benefits to a captive programme?
Marine Charbonnier: adding employee benefits within a captive has many advantages which, however, depend on the particularities of each organisation and the stakeholders involved. In general, the use of a captive can be a method of control and management of the group's social protection policy, whether from a risk, financial or human point of view. It’s for these reasons that we are seeing a growing interest from our clients.
- Diversification – for risk managers, employee benefits are a way to diversify the risks taken by the captive. The controllable volatility of the risks underlying the employee benefits policies makes it possible to stabilise the results of the captive and protect its capital. In fact, for a large population, these risks are predictable risks, with few peaks in claims and lower volatility than many property and casualty (P&C) risks.
- Capital management – in addition, the controlled volatility of this risk and the diversification can limit the impact on the solvency margin and therefore answer the questions of financial departments in terms of optimisation of sub-solvency capital.
- Financial control and pooling – for financial management, the addition of employee benefits to a captive can represent a source of income and / or expenditure control, particularly by capturing a part of the profits of insurers and / or by reducing the cost of policies.
- Social advantages – for HR managers (those at head office or at the parent company), the use of the captive is a means of controlling the quality of cover, harmonisation of benefits and a means of satisfying social partners. The captive should ideally make it possible to bring together all the information and allow HR teams to have a comprehensive and detailed view, making it possible to analyse the quality of the benefits offered in each country.
- Global partnership – a captive should be seen as an opportunity rather than a constraint. It helps to create a global partnership between HR, risk, finance and an insurance network to provide employees with quality, balanced and sustainable social protection.
For more information on using a captive for your employee benefits please contact your local MAXIS representative.