Multinational pooling and captives increasingly used to limit cost of insurable employee benefits, globally

ARLINGTON, Va., March 09, 2017 -- 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. The primary objective for doing so centers on lowering premium costs or reducing cost increases below local market inflationary levels, according to leading global advisory, broking and solutions company Willis Towers Watson’s (NASDAQ:WLTW) Multinational Pooling and Benefit Captives Research Report.

The 10 most profitable countries for all pooled business, expressed as a percentage of all pooled premiums within a country The 10 most profitable countries for all captive business, expressed as a percentage of all reinsured premiums per country

The 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,” said Roger Beech, director, Global Services and Solutions, Willis Towers Watson. “As multinationals seek cost management opportunities, taking a proactive and considered approach to the management of insurable benefits can lead to relatively easy savings.”

In terms of geographical variations in multinational pooling performance, Sweden produced the largest savings as a percentage of total premium pooled, at 41%, while contracts in Canada were the worst performers, with average returns of 16%. For employee benefit captives, variations in profitability were even wider, with Japan producing the largest returns, at 55%, while Ireland was the worst performer, with average returns of –24%.

“The findings do not mean that companies should automatically include every benefit plan in Sweden or Japan, or exclude every contract in Canada or Ireland,” said Beech. “Rather, they should conduct due diligence and consider their own objectives, claims experience, premium rates, network retention levels and other factors before adding or continuing to include any contract in their pool or captive.”

Figure 1. The 10 most profitable countries for all pooled business, expressed as a percentage of all pooled premiums within a country

An infographic accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/b59545fc-72fe-4d2e-a7e0-3e7a98bcc327

Figure 2. The 10 most profitable countries for all captive business, expressed as a percentage of all reinsured premiums per country

An infographic accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/73ed0d0b-4e8d-4fdc-b82d-3efc4f08af0a

In terms of the types of employee benefits, life insurance contracts were the most consistently profitable, with returns of nearly 27% for employee benefit captive business and 19% for multinational pooling. Stand-alone health care contracts produced average returns of 0.7% for employee benefit captives but were consistent deficit producers for multinational pools, with average returns of –6.3%.

Notes to editors

Our report, Unlocking potential: global approaches to insurable benefit financing, summarizes the results of Willis Towers Watson’s 2017 multinational pooling and captive research, which analyzed the performance of 203 multinational companies that provided over 1,500 multinational pooling and employee benefit captive reports over five years, covering US$6 billion in premiums and 118 countries.

About Willis Towers Watson                            

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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