Benefits: Postcards from Europe

Transcription

1 Benefits: Postcards from Europe

2 London

3 Paris

4 Munich

5 Luxembourg

6 Vevey

7 What we ll cover..practical thoughts for those who have done it For those who have already dipped their toe into the vast possibilities for insuring benefits through a captive, the panelists will help participants into deeper waters through a case study approach presented by those who have done it. Among the important and practical topics to be covered are: The annual captive cycle What do these guys do? Premium allocation/ setting premiums what does this mean? Reviewing the financials What do you want from a provider? Internal stakeholders What are some of the key challenges Getting it right

8 Joanne Armenio Director Global Benefits Chicago Bill Fitzpatrick VP - Corporate Risk Benefits London Kareena Hooker Global Head of Insurable Employee Benefits London

9 Overview of the three captives Captive Name Parent Sponsor Annual EB Premium ($) Domicile Effective Date Benefits Included Fronting Partners Benefit Lines Berkeley Re Mondelēz 18m Dublin 2009 Generali, Maxis Life, Disability, Medical, Accident HSBC Insurance (Bermuda) Limited HSBC 50m Bermuda 2008 Allianz, Maxis, Generali Life, Disability, Medical, Accident Marias Falls Deutsche Post DHL 100m Bermuda 1996 Maxis, Generali, Prudential, Liberty Mutual, Legal & General, AXA and Cigna Life, Disability, Medical, Accident, Expat Medical, BTA, US LTD

10 Who does what and how does it work Mondelēz International The Captive, Berkeley Re Captive based in Dublin, so subject to Irish regulation Responsible for Captive Captive Board Irish Regulator Fronting Networks, Generali and Maxis Strategic Advisers, Towers Watson Captive Manager, Aon Administer program Ensure payment of premiums, claims and charges Report results to Captive Board Advice to Captive Updates on best practice Analysis of quarterly results Daily management of Captive Review pricing of contracts Regulatory compliance

11 Who does what and how does it work CONVENTIONAL MARKET INSURANCE DHL Business Units Market Premium Insurance Policy MAXIS Local or Insurer Generali Local Insurer CAPTIVE INSURANCE *Net Premium = Gross Premium less the global program discount (20-25%) ^Ceded Premium = Net premium less administration, taxes & fronting fees MAXIS Generali Ceded Premium & 100% Risk Claims DP DHL Reinsurance Subsidiary

12 Who does what and how does it work

13 PUBLIC Group entities must comply with policies and processes established by the Insurable Risk Function applicable to corporate insurance programmes. IEB Standard applies to Life, Disability and Medical programmes, covering: Financing; Renewal Process; and Governance. The aim is to achieve: Global Consistency; Improve Efficiency; Reduce Risk. SELF-FUNDED PLANS Third Party Administrator Medical Trust Vehicle Who does what and how does it work EMPLOYEE BENEFITS POOL Preferred Insurer HSBC Insurance (Bermuda) Limited Preferred Broker HR and PROCUREME NT CENTRAL IEB TEAM Key Accountable Responsible Risk Financing The Function ultimately responsible for the fulfilment of the Standard The Functions / body responsible for undertaking the work to fulfil the Standard Providers involved in risk financing INSURABLE RISK

14 We see activity falling into 3 buckets These activities occur throughout the year and can cross over buckets Marketing Day-to-Day Stakeholder Management New business opportunities Renewals with locals Marketing the concept Internal resource/consult Managing renewals Liaising with providers Local country issues resolution Negotiating T&Cs local global Review of reports Data analysis Reviewing performance Engaging stakeholders Leadership HR Finance Legal Tax

15 How are rates determined when you use your own captive? Let s take an example Captive assumes risk and holds 100% of the premiums and reserves (where legally possible) Program includes life, disability, medical, accident, voluntary or employee-paid insurances Use fronting companies to issue local policies, provide local administration and rate recommendation Annual premiums determined by Captive based on experience risk philosophy? Local operations continue to determine benefit coverages in line with HR philosophies (local and global) August Mid September Mid October 1 November 1 December 15 January Mid year review of rates Data requests to local offices Census data to providers Renewal rates finalised Premium insurers set by providers Annual premium paid Initial budgeting Determine potential adjustments Rates recommended by local underwriters Premium allocation meeting Approved by Captive Communicated locally

16 Reviewing the financials.how important? Fee Management Central administration fees Local fronter/administration fees Broker commissions Claims and Reserves Bordereau reviews Actuarial reviews of loss reserves Provide reserve opinions if required Performance testing of loss reserve estimates Capital and Reinsurance Evaluate risk retention and reinsurance levels relative to capital Solvency margin analysis Business planning Developing financial models to compare modified future business scenarios against status quo Identify and analyse development or expansion opportunities

17 What do you want from a provider? Solid long-term global partner Good geographical coverage both countries and products Strong control over local partners Knowledge of operating under captive model throughout Network Strong technical ability Central technical/underwriting support to help decisions on pricing and whether to accept risks. Risk management capabilities and being able to ensure that local offices price and manage claims prudently Cash flow Transparent costing fronting, solvency, admin, reinsurance Willing to work with different premium frequencies and cede to captive Cession of reserves to captive Service More service required than pooling Data and reporting accuracy Monthly bordereaux if needed? Annual reporting timely work with captive manager Meetings Flexibility to make things happen Reinsurance Offer what the captive wants

18 What do you need to get it right to manage an on-going successful EB captive? Recognise that the captive is a long-term strategy that involves active management by the corporation Be sure objectives are clear and priorities identified, e.g., cost reduction, cash flow enhancement Clear ownership within your business Effectively coordinate internal units involved in captive assessment, e.g., finance, HR, risk management Seek management support and create communication plan for a smooth implementation Explain that: The reinsurance agreement between the insurance company and the captive will not affect local contracts between employee/employer and local insurance company Extent of cover and scope of benefits not affected by implementation More?

19 What are people talking about in Europe Are these Hot Topics over here Vendors and Market Fronting network structures and capabilities are different and developing Solvency II impact on EU based vendors and captives Both financial implications and increased governance and reporting Governance Mapping out the roles of different stakeholders in managing global arrangements Deciding on the appropriate pricing model (and reserving) Ensuring appropriate servicing from your fronting vendors through putting in workable SLAs/ KPIs Understanding and managing risks Pandemic exposures Estimated Maximum Losses (EMLs) Appropriate protection Data towerswatson.com Use of data to drive risk management and ultimately interventions Analysis of trends can be used to implement targeted cost control measures Immediate impact increasing deductibles, imposing exclusions, reducing limits, excluding high cost facilities etc Longer-term strategic initiatives health & wellbeing and wellness strategies

20 Questions