Global employee benefits programmes and global P&C programmes are increasingly similar in approach
Only a small portion of multinationals link employee benefits to their global programmes, although it is likely global employee benefits programmes will become more similar to international programmes in the next few years.
Fewer than one in five respondents to StrategicRISK’s people risks survey say their employee benefits are linked directly to their international programmes, while for almost half of respondents the programmes sit independently.
Usually international programmes for property & casualty (P&C) and global employee benefit programmes are directly linked if the multinational company uses their captive for the financing of both life and non-life benefits, says Lance Henderson, head of sales and relationship management at Zurich Global Employee Benefits Solutions.
“They can be linked by simply reinsuring or retroceding the risk of those life and non-life benefits through the captive,” he says. “That typically changes the loss experience of the captive, because employee benefits are more predictable. The losses are less severe for employee benefits and there can be some tax advantages, especially in the US.”
According to Henderson, only around 90 companies globally are using their captives for both global employee benefits and P&C programmes, showing there is still a lot of potential for growth in this area.
“We’re also seeing global insurers designing international employee benefits programmes that are looking a lot more like international programmes on the general insurance side in that they offer a centralised control over not just the financing of global employee benefits but around the terms and conditions of those benefits for each country that’s included in the programme,” he notes.
However, employee benefits are slightly different from P&C, because the company almost always needs to have a local insurer involved in the provision of those benefits, whereas sometimes for global P&C programmes, the company can arrange the insurance from a central level.
“But they are still very similar in approach including a holistic approach to underwriting on a global basis rather than underwriting country by country which is what we’ve seen for employee benefits until the last year or two,” Henderson says.
“So it’s more likely that, absent a captive, the international programmes for employee benefits and P&C will run somewhat parallel, but have a lot more similarities in the coming years.”
Click here to read the full report on StrategicRISK’s people risks survey