In this GCP Short, produced in partnership with the EY Global Captive Network, Richard is joined by Emiliano Luzzi, partner and insurance consulting leader in Luxembourg, and Vittorio Zaniboni, captive and insurance excellence leader, to discuss the recent expansion into Luxembourg.
In a 15 minute discussion, Emiliano tells us about the development of EY’s insurance practice in Luxembourg over the past 18 months and its main areas of focus, while Vittorio explains the role he sees for EY in employee benefits consulting.
The board of energy mutual Everen has appointed Robert Foskey its chief operating officer, succeeding George Hutchings who is retiring year, end but will remain with the company for the balance of 2023 as special advisor.
The newly elected board also selected John Weisner as chair and Robert Wondolleck deputy chair for 2023.
Everen recorded a net loss of $776.7m in 2022, driven by net investment losses of $524.8m, net underwriting losses of $229.2m and general and administrative expenses of $22.7m.
Board directors declared a dividend in the aggregate amount of $200m payable on or before 29 September 2023 to shareholders.
Bertil Olsson, president and CEO, said: “While 2022 was financially challenging, our insured losses were within expected levels. Everen is focused on creating long term value and a strong commitment to our shareholders.
“Our goal is to continuously deliver stable and sizeable capacity with consistent terms and conditions through difficult market environments. Over the past nine years, Everen has charged premiums of $4.1bn while returning almost $3bn in dividends to shareholders.
“The Board’s decision to issue the $200m dividend carefully considered the company’s multi-year capital management plan and potential future capital needs of the strategic plan.”
Robert Foskey, senior vice president and COO, said: “During 2022, Everen focused on several strategic plan initiatives including expanding our product offering by increasing the limit to $450m, rollout of the company’s new brand and website, and enhancing our internal and external marketing activities.
“We continue to see strong interest from energy companies around the world and welcomed two new shareholders including CEZ from the Czech Republic and Colonial Enterprises from the United States.”
In a recent interview with Captive Intelligence, Olsson discussed how Everen is helping to facilitate the global transition to a greener economy by providing an insurance option to all types of energy companies, including both old and new projects.
French legislation passed at the end of 2022 is presenting an “unprecedented opportunity” for captives in Europe, according to Emma Sansom, Zurich’s group head of captives.
In a wide-ranging interview as guest co-host of GCP #81, Zurich’s new captive chief discussed her priorities for the new role, where she expected to see further innovation and the overall value proposition of captive insurance.
Sansom moved to Switzerland to take on the new role at the start of the year, having previously been Zurich’s head of captive services in the UK. Captive Intelligence reported today that Esme Gould will succeed Sansom in that role.
Discussing recent moves in Europe for new captive legislation, Sansom said developments in France were particularly promising.
“The recent legal framework that has been announced I think is actually an unprecedented opportunity in this space,” she said.
“You’ve got the French Treasury talking about captives providing support for systemic risks for their parents. We need to be getting in and engaging with the market and understanding what it is that Zurich can do to support their customers and their new potential customers in this space.
“There’s been conversations about potential repatriation, but actually I think there’s a huge opportunity for new formations as well.
“We can provide some support and insight into those conversations along with the likes of Aon, WTW and Marsh.”
Sansom also said she was keen to explore whether more group captive-type structures could become better utilised in Europe.
Zurich already works with group captives in the North American market and in January 2023 announced it had partnered with Innovative Captive Strategies (ICS) to launch a Cayman-domiciled group captive that will bring together companies wanting to optimise their risk management programmes and advance sustainable practices.
“Why it’s worked so well in the US is because you have quite a large market, which means that diversification across a group captive portfolio is quite easily achieved,” Sansom added.
“So I think we need to establish whether or not that’s possible in Europe. They also have dedicated distribution channels and therefore they have experience in management and marketing of these structures. So it is quite well defined and quite mature in the US.”
In episode 81 of the Global Captive Podcast, Richard is joined by guest co-host Emma Sansom, group head of captives at Zurich, who discusses her priorities in the new role, their view on D&O in captives and Zurich is supporting more cyber captive programmes.
There is also an interview with Megan Ogden, chief operating officer at Energy Insurance Services, a sponsored captive in South Carolina which provides cell facilities to members of Energy Insurance Mutual.
Both interviews reference a recent Long Read on Captive Intelligence about renewable energy companies and their interest in utilising captives. Read it here.
Esme Gould will be Zurich UK’s new head of captives, effective from 1 April, leading a team of six captive underwriters to develop and grow new and existing captive programmes.
Esme Gould, Zurich UK
Gould’s appointment follows Emma Sansom’s move into Zurich’s group head of captives position at the start of the year.
Bernadette Hackett, Zurich’s head of customer and distribution management, said: “Esme is a talented leader, and brings with her deep insight and knowledge of our business and the market.
“She was the outstanding candidate to lead our captives business in the UK. Her appointment reflects the strength and diversity of our internal talent pool.”
Gould is currently head of heavy industry in Zurich’s energy, marine and construction team.
She has also held a number of energy underwriting positions with Zurich since joining the company in 2014.
“I’m thrilled to take on this role at such an exciting time for the captive industry,” Gould said.
“We see lots of opportunities for businesses to establish and manage captives in innovative and cost-effective ways. I’m looking forward to exploring these opportunities with new and existing customers, and our distribution networks.”
Promethean Risk Solutions has been formed by industry veterans Kirk Watkins and Michael Zuckerman, focusing on building and consulting on voluntary employee benefits and other third party risk programmes.
Promethean’s model does not require its clients to have a captive or to join a group captive programme, with Promethean utilising its own captive, FairShare, to reinsure the risk and return 100% of the net profits to the customer.
“We are excited to introduce Promethean’s fresh take on voluntary benefits, our unique approach not only generates additional profits for organisations but enriches the lives of employees, tenants, students, alumni, customers, and other stakeholders,” said Watkins.
“We work directly with brokers, captive managers, H.R. professionals, or captive owners. Whether or not an organisation owns a captive, they can still participate in this impactful and profitable programme.”
For insureds with an existing captive, Promethean can structure the programme to retrocede the risk.
Zuckerman said: “We believe our offerings will be a game-changer. We are excited to help organisations leverage their resources and generate profits/share risks to benefit their stakeholders. It is a win-win offering.”
Zuckerman and Watkins will be supported by a board of advisors made up of former Vermont captive regulator David Provost, Michael Corbett, of Pinnacle Financial Partners, and Courtney Claflin, a CICA board member and head of insurance at Fluid Truck.
The firm’s regulatory and insurance counsel is provided by Benjamin Whitehouse, partner at Butler Snow and a member of its regulatory and government relations practice.
Experienced captive lawyers Joe Holahan and Tony Roehl have joined BakerHostetler from Morris Manning & Martin.
Washington DC-based Holahan and Atlanta-based Roehl are joined by fellow partner Lori Bibb, four associates, a counsel, a paralegal and a legal assistant.
Holahan is a respected lawyer in the captive insurance industry, with experience on formations, mergers and acquisitions, governance and contracting.
“I am thrilled to welcome Joe to the Washington office,” said Jeff Paravano, managing partner of the firm’s Washington office. “Joe’s insurance industry and related transactional and regulatory experience will undoubtedly benefit our clients.”
Roehl is well known for his involvement in the Georgia captive community, including as a founding member and board director of the Georgia Captive Insurance Association.
“The Business Practice Group has been on a tremendous trajectory, adding dozens of talented attorneys over the past year,” said Joann Gallagher Jones, managing partner of the firm’s Atlanta office.
“Tony and Lori share our commitment to excellence, and I am delighted to have them join the Atlanta office.”
In a recent Long Read on Georgia as a captive domicile, he told Captive Intelligence: “The state is an excellent place to do business. And we’re fortunate to have a number of very large and successful companies here in the state.”
Several rising captive professionals have partnered with the Vermont Captive Insurance Association (VCIA) to formalise the Vermont Captive Insurance Emerging Leaders (VCIEL), in a bid to help address the challenge of developing the next generation’s captive workforce.
The group will be a platform not only to recruit students to the industry, but cultivate emerging talent already working in captives.
“VCIA is proud to work with the VCIEL to take strategic actions that yield positive results for the industry,” said VCIA President Kevin Mead.
“We take this workforce challenge seriously and the group is a deliberate way to seek effective solutions.”
Brittany Nevins, a major catalyst for the group and the captive insurance economic development director for the State of Vermont, said: “We are at a critical time in our industry where there’s rapid growth captive formations, while those who are providing services to these companies are retiring faster than those entering the industry.
“We will address this challenge proactively in Vermont with VCIEL.”
Formed under the auspices of VCIA, VCIEL aims to preserve and advance Vermont’s captive domicile status through developing a new and diverse talent base to contribute to the State’s captive community and add value to the industry worldwide.
VCIEL holds regular meetings and welcomes more captive professionals to bolster its group.
It will provide student outreach and networking opportunities, as well as build out a roster of speakers to add fresh energy to the captive conference circuit.
Ian Davis, senior vice president of captive insurance at M&T Bank and a member of VCIEL, said: “Vermont is home to one of the largest networks of experienced and knowledgeable captive insurance professionals in the world.
“VCIEL represents one way to leverage the expertise that exists to promote the state, highlight captive insurance career opportunities, and support future leaders.”
Spring survey shows 42% of employers with medical stop loss cover, self-insure within a captive
Writing MSL in a captive is beneficial for diversifying the portfolio of risk
MSL is commonly written across single parent, group and cell captives
The number of captives writing medical stop loss (MSL) continues to increase substantially, primarily as a result of hard market conditions in the commercial market, as well as the general state of the healthcare landscape in the United States.
Within the US, there is major change happening within the healthcare market, and all parties in the space are being asked to handle risk and chase healthcare dollars.
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As Chief Underwriting Officer at MAXIS GBN, Nicola Fordham leads a team of underwriters who work closely with the MAXIS network of local insurers and multinational clients, overseeing the pricing and underwriting of business included in global programmes. Contact Nicola here.
Nekisha Tyrell, chief underwriter at HSBC’s captive, and I both gave what I would call “a knowing laugh”. And it certainly wasn’t because it was a bad question from Richard, but I think it was the word “easily” that got us.
Medical inflation is one of the biggest topics in the global employee benefits industry and thousands of insurance professionals around the world spend their time studying it to ensure they’re effectively pricing their medical benefits.
I understand that not everyone will be familiar with this topic, so before we delve into the role captives can play in managing medical inflation, let me take the conversation a little bit back to basics.
What is medical inflation?
Simply put, medical inflation is the rise in the cost of medical treatment from one year to the next.
Generally, medical costs rise year on year as treatments get more expensive. New drugs, treatments and technology all help to make healthcare more effective, but that comes at a cost.
And, of course, healthcare isn’t immune to general inflation trends either. Lots of things that contribute to the delivery of healthcare rise in cost every year too, like transport, energy and employee salaries, to name a few examples.
All of these contributing factors play into the final price of treatments and healthcare services and are included in overall medical inflation.
Ultimately, this means that medical inflation tends to outpace general inflation and rises at a faster rate. And just like general inflation, medical inflation can differ significantly country-to-country and region-to-region, making it a substantial challenge for multinationals writing medical insurance in a global programme to keep on top of it.
Medical insurance is also wide-ranging, adding another layer of complexity. Because medical insurance is a more used benefit than something like life or accident insurance, there can be thousands of claims to manage.
These can vary from surgeries and other inpatient procedures for serious conditions, to more common claims like dental, optical and physio that anyone could need anytime.
The increased incidence of these kind of claims makes correctly pricing medical insurance even more important. Correct pricing is crucial on any line of business, but given the thin underwriting margins in medical, the claims frequency and medical inflation, it’s something insurers (and captives) need to get right.
Pricing medical in a captive programme
In recent years, there’s been a growing tendency to write employee benefits lines of business to a captive. This started with more long-tail risks such as life, accident and disability, but recently employers have started to look at using their captive to write medical policies too.
Adding employee benefits has helped captives to offset traditional property and casualty risks with unrelated business, benefit from underwriting profit and influence global employee benefits standards around the world with central governance.
But, as the ultimate risk bearer, it’s important that captives properly understand how to price their medical risks, particularly with medical inflation rates so high.
Insurers use medical trend to project the percentage increase in the cost of their medical policies from one year to the next. Trend works on the assumption that the plan design is exactly the same as the year before and shows the percentage increase on an apples-to-apples basis.
Many of the largest brokers and consultants in the employee benefits space publish their annual trend reports each year – this helps to show the projected rise in cost of treatment in each region and at a global level. And by using these trend rates, captives can more effectively price their medical insurance.
Here’s a rough idea of how to price medical risks.
Review your previous years’ claims.
Adjust the claims cost for past changes (ie, head count changes, has the number of people covered by the policy increased or decreased?)
Adjust the claims cost for changes being made at this renewal (ie, plan changes – are you going to increase cover in some areas, reduce it in others?)
Increase your adjusted claims cost for medical trend. This is likely to be the country trend but could be based on the region, the portfolio or, if there is credible enough data, the group being priced.
Add expenses and any profit margin.
And this pricing method is effective. Employee benefits professionals sometimes worry that including medical will negatively impact a global programme’s overall performance, but it’s possible to underwrite medical policies quite accurately at the global level.
In 2021 the net loss ratio of medical policies included in MAXIS GBN global programmes was 99% and this figure has been consistent over recent years with the exception of 2020. In 2020 there was claims suppression due to the social restrictions in multiple markets because of COVID and this resulted in an improved performance, but this is of course an anomaly.
Controlling medical inflation
So, we know that it is possible to price medical accurately, but now to get to the crux of Richard’s original question “can a captive help employers control medical inflation?”
In short, the answer is yes. Once you’ve predicted your claims cost for the year ahead, you can then begin to explore cost-containment measures. Many of these are around plan design and will depend on the medical portfolio of each captive. Here are some ideas:
Are your people using “out of network” providers? Many insurers will have relationships with preferred providers and claims could be more costly if an insured person is going to a different provider. If your people seem to be going to an out-of-network provider, you could consider bringing that supplier into your network or adding a co-pay (a charge paid by the insured person) for using the out-of-network service.
Is there a trend of using more expensive branded drugs? If there’s a generic alternative that provides the same health outcomes, you could consider adding a co-pay to the branded drug to discourage usage of the more costly brands.
Do you have the correct benefits limits set? Reviewing your limits could be another way to ensure your medical costs aren’t spiralling.
Aside from plan design, health and wellness programmes could be vital for keeping employees healthy and controlling medical inflation. Including medical in a global programme gives employers access to a wealth of medical claims data from around the world.
By analysing medical claims, you can start to build a picture of the overall health of your employee population and assess the conditions that are causing the most costly claims. You could then look at implementing targeted wellness interventions based on these.
For example, if you see increased respiratory and heart conditions in countries where smoking is more prevalent, you could consider a smoking cessation programme.
This is just one example, but in reality, every employer will have a variety of wellness challenges… If you’re not sure where to start, I’d suggest discussing this with your global employee benefits network, broker or consultant!
Writing medical in a captive can be complex, but I hope this shows that medical inflation is something that can be monitored, managed and controlled… just maybe not easily.
