How to add a revenue stream to your global benefits programme

The enormous risk and uncertainty of the last 18 to 20 months has seen some key trends in terms of captives growing in number and premium volume, and an increasing interest in funding benefits such as accident coverage.

Such benefits tend to be among the most profitable risks for captives – also for pools – allowing them to generate savings. In 2020, captive benefit funding in direct premium volume increased for reinsurance of multinational pooled global disability by 31%, according to a report by Marsh. 

Until recently though, it was difficult to put certain ‘profitable’ products like group personal accident (GPA) for example into a captive or pool. Why? Because not many insurers or EB networks would do it. It was simply considered too valuable as a revenue stream.

However, that possibility is now a reality.

Generali Employee Benefits (GEB) Network recently announced the launch of its GPA product in the UK, with the ability to reinsure back to a captive or include in a pool. In addition, GEB can issue policies around the globe and in a locally compliant way.

GPA enjoys a lower loss ratio, especially in comparison to property and casualty business, or indeed some of the most common employee benefits found in pools or captives, such as medical expenses insurance.

For example, UK annual operating ratio data from the Association of British Insurers shows that in 2019 the claims ratio on personal accident insurance was 41.9%, in comparison to medical expenses insurance at 66.6%.

So, by reinsuring GPA to a captive or including it in a pooling programme, it’s possible to reduce the total cost of risk and enhance sustainability. A lower cost of risk can obviously represent a competitive advantage, affording multinational owners financial flexibility and also efficiency.

What is GPA?

GPA may be considered the cornerstone of any employee benefits programme. It provides an immediate financial solution in the shape of a lump sum or weekly benefit for employee accidents and injuries that occur anywhere and anytime, including outside the workplace and while abroad (dependent upon the type of cover chosen).

Cover varies between providers but typically includes: accidental death; temporary and permanent disablement; broken bones; funeral expenses; and psychological therapy benefit.

The employee benefits from financial support while out of action, removing a big part of the worry for both themselves and their families.

The employer benefits from reduced business disruption and a more attractive and robust financial package to support talent attraction and retention. It enhances employer duty of care, saying to current and prospective new employees that the organisation goes above and beyond statutory requirements. Find the global overview of GPA coverages by country on geb.com.

Why are captives and pools good options for employers?

Multinational pooling is a mechanism that allows multinational companies to combine the insured employee benefit plans of their subsidiaries in different countries with a multinational pooling network. The type of coverages that can be included are: life, disability, accident, medical, dental and pension (only risk coverages).

The pool combines the performance of local and cross-border group policies around the world into a single, profit-sharing account, to balance the positive and negative experiences of the pooled policies. In case of a positive pool experience, the client can receive a multinational pooling dividend.

Pooling is not only for the biggest companies. For example, minimum requirements for GEB’s lifecycle pooling solution are €20,000 in pooled premiums and at least two countries.

Additionally to global financing function of pooling, a quality network can also help companies manage some of their biggest people issues, namely: recruitment, retention, absenteeism and productivity.

Meanwhile, captives take things to another level, giving global companies an unparalleled level of control in terms of managing risks, reducing costs and affording flexibility in terms of underwriting conditions, rate setting and benefits design.

But they’re not for everyone. Putting in place a captive is a big step and not one that should be taken lightly.

A captive is basically an insurance company formed by a multinational corporation to insure the risks of its own subsidiaries. It therefore requires a company to be very well governed and organised. It also requires considerable commitment in terms of time and costs, in the setup stages at least.

Like a pool, all types of employee benefits insurance can be placed in a captive solution.

Captive programmes have really come into their own during the last 18 to 20 months, with growth seen in almost all industry sectors in 2020 as mentioned earlier, because they help solve business challenges and support strategic objectives.

The pandemic has served to further solidify an already hardening market, characterised by higher insurance premiums, tougher underwriting, providers writing less policies and reduced competition between providers.

That is also driving interest in captives.

Whatever the market conditions though, risk diversification is key to cost savings and sustainability. GPA presents multinationals with one of the simplest ways of diversifying, not to mention valuable cover for the employee and employer, and a revenue stream to boot.

What’s not to like?!

Partner content contributed by Karoliina Gutaj, global head of strategy and marketing personal accident and business travel insurance, Generali Employee Benefits