Finding the optimal financing solutions for your benefit plans
The costs of workers' compensation and employee insured benefits vs non insured benefits are climbing rapidly. It’s not surprising that, according to the 2023 People Risk Report: Pulse Check, risk managers across Australia and New Zealand rated two of their top 5 risks as governance and financial risks.
Increasingly, employers must look beyond traditional insurance approaches and adopt creative and innovative financing agreements to optimise benefits and minimise risk. Depending on your organisation’s appetite for risk, self-insurance through administrative-services-only contracts, trust arrangements, or captives can reduce your risk transfer costs (where allowed by law). This is often appropriate for expenses that are easy to project, especially if they can be pooled with other risks.
Captive Insurance
Captive insurance arrangements are typically used by large multinationals to self-insure selected risks. Globally there are over 5,000 captives established with a small but growing percentage that include benefits risks.
While some organisations establish multinational benefits pooling arrangements, others seek to improve risk financing by using a captive to assume risks such as life/death, accident, disability, and medical/healthcare.
Using a captive can lead to improved cash flow, consolidated premium spend, statistically predictable risk, the ability to create insurance reserves, greater management or risk retention levels, and diversification between risk classes, thus improving capital efficiencies.
