For multinationals, the annual costs of employee health and risk benefits, including medical, life and disability protection, are enormous. Global benefit leaders must manage these long-term costs if their companies are to remain competitive and keep pace in their marketplaces.
The Towers Watson 2014 Multinational Pooling and Benefit Captives Research Report focuses on examining two of the most popular benefit financing strategies. The study, one of the largest of its kind, explores the way companies use multinational pooling and captive arrangements to their advantage and answers many of the questions commonly asked by global benefit leaders about these approaches.
Pooling and captive data from nearly 800 annual reports submitted by 163 multinational companies were collected and analyzed, covering US$3.1 billion in premiums across 93 countries. The study incorporates all participating benefit plans, including life, accident, disability, medical and some retirement plans (e.g., risk-related elements, such as spouse or orphan benefits). Key findings from the analysis show:
- Multinational pooling continues to be a viable long-term cost-savings tool for companies. The surprisingly large spread between mean (6.1%) and median (1.9%) company returns means a smaller number of participants have a larger share of surpluses.
- Captive arrangements offer additional savings for some companies. Median captive surplus is 12.5%.
- There are wide variations in profitability based on geography. Indonesia showed returns of +36% of premium while Hungary showed returns of –36%.
- Returns vary based on coverage types: Stand-alone life business delivered +23% returns, while stand-alone medical contracts delivered –8% returns when included in pools. Therefore, reviewing each contract’s participation is critical.
- Average dividend returns for multinational pooling were similar between loss carry-forward (6.7%) and stop loss (6.2%) pools.
As specialists in this field, Towers Watson experts can draw from their deep knowledge of the complex legal, accounting and regulatory factors to assist clients with all elements in managing multinational pooling and captive arrangements. For more information, please contact your Towers Watson consultant or:
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