global-benefits-vision.com December 2016

Knowledge & Wisdom for Global Employee Benefits Professionals

10 Global EB WatchChris Bruce

18 Death in Service PensionsPaul Avis

22 Starting an Employee Benefits Captive

Marc Reinhardt, Sven Roelandt, Philippe Viénot, Mark Cook

28 What is the Difference between a Migrant and an Expat?

Amanda Klekowski von Koppenfels

32 IGP Sao Paulo Conference Report

6 Global Benefits Vision - December 2016

Profiles of Contributors

He has been a speaker at various IEBA conferences, as well as at the most recent European Captive Forum.

sven roelandT roelandt@geb.com

geB - generali employee BenefiTs Regional Manager WEMEA

Sven Roelandt joined the Generali Employee Benefits Network as Area Manager

for the Nordics and Benelux back in 2012. He is currently holding the position of

Regional Manager with responsibility for the Brussels Regional Office team, which

overlooks the WEMEA region.

Sven holds a degree in mathematics and physics, but has been active in the field

of Employee Benefits for over 20 years. After 10 years of activity on the Belgian local

market, he moved on towards the international employee benefit environment where

he gained experience in the areas of multinational pooling arrangements, captive

programmes, global underwriting models and solutions for expatriates.

Marc has worked with Generali since 1991 in Germany, Italy, and the

USA. While in Germany, Marc specialized in Tax and Labor Law as well as

actuarial aspects of employee benefit plans for international companies

based in Germany. His assignment in Trieste, Italy, focused on the

technical aspects of multinational pooling & captive business in the central

reinsurance department of Generali's home office.

Marc was permanently assigned to the U.S. where he had operational

responsibility for the Generali Employee Benefits’ (GEB) Americas region

which includes Canada, USA, Central and South America. In addition, he

was responsible for ongoing and future partnerships for the network in

the region. Effective April 1, 2016 he was appointed Director of Sales &

Distribution with the responsibility of managing GEB’s commercial teams

in 11 regional offices across the globe.

Marc Reinhardt has the equivalent of a combined Post-Grad/Master’s

Degree in Economics and Insurance from the University of Frankfurt.

marC reinhardTreinhardt@geb.com

geB - generali employee BenefiTsDirector - Sales & Distribution

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Profiles of Contributors

Philippe was trained as an aerospace engineer with a MBA. He worked

6 years with Astrium (EADS) as satellite architect and system’s engineer.

In 1996, he joined Marsh France, managing the space practice for 6

years, before becoming deputy head of FINPRO.

He was hired by AIG France in 2006 to manage the Financial Institutions

and the Professional Liability lines, then he managed all Financial Lines

for the middle market.

He joined BNP Paribas in 2009, as corporate risk manager.

philippe vienoT

Bnp pariBas

Risk Manager

Mark Cook is a Director in Willis Towers Watson’s Global Services and Solutions group

based in London and advises on a range of international employee benefits issues.

He is an international benefits expert and has worked at Willis Towers Watson for over

20 years.

Mark leads Willis Towers Watson’s benefit financing group globally and assists a variety

of clients from different sectors with the optimisation of employee benefits financing.

This includes a wide range of self-insurance, insurance, multinational pooling and captive

related assignments ranging from annual management/ governance such as premium

setting and claims/ reserving analysis to the set-up of successful and sustainable benefit

captives, global underwriting models or multinational pooling arrangements. Recent developments in this space

include the transfer of retiree medical assets or retirement pension liabilities to a captive, the bulk portfolio transfer

of certain EB risks to a single insurer or the transition to a cross border regional benefit plan.

He also facilitates the annual Captive User Group forum each May in London that now has over 750 members from

risk, finance and HR. The key objective of this group is to exchange information among companies that use captives

for employee benefits (or companies that are considering use of captive for employee benefits).

Mark regularly speaks at industry forums and is a frequent author of related articles on the above topics.

mark Cook mark.cook@towerswatson.com

Willis ToWers WaTson - gloBal serviCes and soluTions groupDirector, Global Services and Solutions

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Marc Reinhardt Sven Roelandt

The management of employee benefit plans through captives continues to gain traction with multinational corporations in

all sectors of industry. Captives are rarely the beginning but generally the end point of a risk management journey. Every

journey has a starting point, of course.

This year’s European Captive Forum (ECF) in Luxembourg included several employee benefit related breakout sessions.

One was called “Getting Started – What Do You Need to Consider and What Is the Role of HR?”

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Philippe Viénot Mark Cook

24 Global Benefits Vision - December 2016

Starting an Employee Benefits Captive

At the outset of the project, several basic but

essential questions had to be asked:

q Where is the company today in terms of

managing its employee benefit programs?

q Where would the company like to go in

terms of managing its benefit risk in

the short, medium, and long term?

q Does the company have sufficient premium

volume and the global footprint to make

a captive solution financially attractive?

q Is an adequate risk management

structure in place already?

q What are the motives for selecting

a captive solution and what is the

company’s risk appetite?

q Who are the stakeholders and decision

makers and how do you get them

to work together?

BNP Paribas started where many multinational

corporations begin their captive journey. Prior

to 2015 benefits were not managed centrally

and there was no harmonized HR policy.

Multinational pooling was introduced but on

a “natural” or “convenience” pool basis only.

HR and risk management cooperated in few

if any areas.

With 190,000 employees in 74 countries,

BNP Paribas certainly has the corporate

profile to gain efficiencies from a more

centralized approach to global benefit and

risk management, and leveraging its global

purchasing power. Attendance at previous eCf

workshops on benefits as well as interaction

with other companies utilizing captives at

a Willis-Towers-Watson client roundtable

raised awareness and interest in the captive

concept. Risk management and HR began

working together to convince top management

that a captive was the way to go as it aligned

with the group’s initiative to streamline

internal processes and reduce cost. Mark from

WTW as well as Sven and Marc from GEB

confirmed and underlined the importance

of close cooperation between risk and HR

The session, moderated by Sven Roelandt of GEB (Brussels), included Phillipe Vienot, risk manager at BNP Paribas (Paris); Mark Cook of Willis-Towers-Watson (London); and

Marc Reinhardt of GEB’s USA office. It encompassed the corporate, consultant, and insurer’s perspective on getting a captive program off the ground.

The panel discussion centered on the recent experience of Philippe and his risk management and HR team at BNP Paribas in setting

up a captive for the company’s international employee benefit plans.

ECFEuropean Captive Forum

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management in the successful operation of

captive programs. Bringing HR into the boat

can’t be stressed enough as a success factor.

Attaining this level of cooperation

certainly poses one of the major

challenges given the different

perspectives and priorities in

managing benefits.

As a first step of the journey,

a captive implementation project plan w a s

drafted with the help of WTW. This encompassed

the mapping of eligible group risk benefits

(life, disability, accident, and medical) worldwide,

a technical analysis of contracts to be

included in the initial phase of the

captive rollout, and a recommendation

for a limited number of employee benefit

networks with which to partner. The selection

criteria for the insurers were global reach and

experience in working with captives.

The next step entailed setting clear objectives

and a governance structure for the

project. A dedicated underwriting

committee (with HR participation) was

created; the captive’s risk management

strategy was defined; and the reinsurance

framework with the selected benefit networks

was contractualized. Philippe and his team

understood that clear communication to all

stakeholders involved in the captive project was

crucial. All local BNP Paribas entities, insurers,

and local brokers were informed about the

captive’s objectives.

In terms of the initial strategy, it was decided

not to centrally impose decisions

on local entities at the outset.

They were simply asked

to include the local insurers of the selected

network partners in the benefit tenders. Should

a local entity choose a different insurer, a

rationale for this decision (plan

design, price, service) had to be

provided. The other panelists

confirmed that communication

throughout the various project phases

is a key success factor and that this

“arm’s-length” approach is not uncommon.

That said, some captives are more centralized

in their decision-making processes. All

participants agreed that there is no

“right or wrong” way to manage a

captive, as so much depends on the

structure of a company, its corporate

culture, and the underlying governance

philosophy. A captive is a work in progress and

the risk management approach may evolve and

change during different project phases.

The captive is now entering the next phase,

with an assessment of the overall benefit risk

composition (less weight of medical premium) and

analysis of the achieved cost reductions. The

ideal future world as described by Philippe

would entail the ability to control

the decision-making process more

centrally and harmonize HR benefit polices

across the group where feasible. Based on their

vantage points as consultants and insurers,

the other panelists affirmed that the path to

a successful captive in essence comprises two

journeys, the initial one to get the project

going, followed by a journey within the captive

to reach the set risk and HR management

objectives. The consensus from the panel was

that at the end of the captive journey, the view

will be worth the climb.∞

26 Global Benefits Vision - December 2016

CirCumstanCes at ProjeCt LaunCh (earLy 2015)

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ProjeCt objeCtives

Group

q Premium reduction out of mutualization with three insurance partners

q Shift from “opportunistic pools” to “managed pools”

HR

q Avoid time spent by 250 entities issuing annual RFPs for five EBs

q Visibility on contracts and claims data within three months (as opposed to 18)

q Ultimately O Groupwide EB purchase procedures O Harmonization of HR policies O Financing well-being initiatives and exceptional cases (ex-gratia payments)

Captive

q Diversification and hence, lower capital requirements under Solvency II regime

q Increased premium flow

q Break-even results, which requires adequate pricing for adequate protections; the captive will only accept contracts in the profit / break-even / small loss, but not in Large Loss categories

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year one initiatives

Captive q Governance

O Creation of a dedicated underwriting committee including one HR colleague

O Governance Manual updated; information of Luxembourg regulatory authorities

q Solvency II O Training of the Board; definition of captive risk

appetite and protection levels O EB underwriting reflected in the five-year

Business Plan and in ORSA1

Networks

q Choice of three preferred partners

q Start of contractualization O Negotiation of central / local fees, collateral,

captive protections O Definition of documents formats (quotations,

reporting, invoicing)

q Quick wins O Specific in-depth studies on some complex

countries (Belgium, U.K., Italy, U.S.), whether poolable or not

Group Entities

q Communication

O Memo by Head of Group HR to all HR correspondents preparing for 1/1/16 RFPs

O Memo by Risk Management to all insurance correspondents

q Process O Nothing formally imposed: local entities

are only requested to include the three partners in their local EB tenders

O Local entities must provide rationale (cover, price, servicing) should they decide not to retain one of the three group preferred partners: “comply or explain”

q Joint visits of some core countries by HR and RM: education, conference calls, explanations

Brokers

q A memo explaining BNP Paribas’s project, the respective roles of various stakeholders, and interaction with the global consultant is sent to local and global brokers

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Proposal for EB Captive implementation project drafted by outside consultant

Preliminary analyses, including

q Full mapping of group benefits worldwide

q Actuarial analyses of all EB contracts and classification under four categories based on their expected outcome:

O Profit / Break-even / Small loss / Large loss

q Recommendation of compatible pooling networks based on geographic footprints and on potential for poolable contracts

Agreement by HQ to finance this project as part of a wider corporate initiative aiming at optimizing processes and reducing costs

Two co-sponsors: Head of Group HR and Head of Group Central Functions

Board of SB Ré (group reinsurance captive) agrees to the project

Project focus on Life, Disability, Accident, and Health only (no pensions)

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year two—GoinG DeePer

Process q Prices are quoted by the local insurers, then reviewed by their network, and sent to the Underwriting Committee of the captive

q The global consultant analyses each quotation, and assesses its expected outcome (profit, loss, break-even)

q The captive indicates to the network O Whether it refuses to reinsure the

contract (e.g., large loss expected)

O Or if it accepts O When there is enough margin, captive can

suggest premium reduction to network

q Captive is not seen by the local entity, nor by the local insurance partner or broker

Group HR set the example: group-wide contracts (such as health coverage for expatriates) are moved to the captive arrangement

Reinsurance agreements and protections signed September 2016 (retroactive at 1/1/16)

Group HR hires an actuary dedicated to the matter

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next stePs

Too much health risk; need more accident, life, and disability

Health insurance is more financing than insurance; it exhibits low volatility and one cannot expect positive results to build reserves

Build a consolidated vision of our book of risks

Access reinsurance markets to buy adequate protections, rather than getting built-in reinsurance from each partner for their books

Assess the actual cost reduction achieved

Reduce local broker fees and commissions

In an ideal world

q Select one global broker for coordination purposes q Get rid of no claim bonuses q Enforce group selected partner(s) locally q Harmonize group HR policies in terms of benefits

Set up enough reserves to finance well-being initiatives and exceptional cases (ex-gratia payments)

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touGh Points

Hard to precisely quantify actual benefits from EB captive scheme

q Strong buying culture in the group; most EB contracts were already purchased at a competitive price

q Many countries experience 8%-10% medical inflation, making it hard to compare year on year

Group culture makes it difficult to enforce global HR decisions locally. Local entities love

q No claim bonuses

q Local brokers organizing local tenders

q Local insurers rather than group selected networks

In many countries, local insurers are already distribution partners or even shareholders of our local entities

Existence of dedicated mutual insurance companies in some core countries

Lack of process and reporting tool (RMIS) to monitor and collect contract data on the go

Reinsurance agreements took very long to negotiate and agree

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1ORSA Own Risk and Solvency Assessment, a regulatory report prepared by insurers and reinsurers under Solvency II rules

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orGanIzed by event beGInS locatIon

WCF World Captive Forum 2017, Boca Raton, 29-31 January 2017

29/01/2017 Boca Raton, fl

IEBA IEBA Annual Conference 2017, Brussels, 1-2 March 2017

01/03/2017 Brussels, belGIum

LOCKTON 2017 Lockton Global Benefits ForumWashington DC, 10-11 April 2017

10/04/2017 Washington, D.C.

IBIS 47th IBIS AcademyCannes, 1-5 May 2017

01/05/2017 Cannes, france

IGP IGP International E.B. Seminar,Boston, MA, 9-10 May 2017

09/05/2017 Boston, MA

LOCKTON 2017 Lockton Global Benefits ForumManila, 15-16 May 2017

15/05/2017 Manila, Philippines

LOCKTON 2017 Lockton Global Benefits ForumLondon, 7-8 June 2017

07/06/2017 London, UK

Conferences 2016-2017

NA

AGD

EConference and webinar organizers, please send information about your events by email to eric.muller-borle@global-benefits-vision.com. Publication is free for now and remains at the discretion of the publisher.