Spring to Sponsor Cayman Captive Forum

Spring is delighted to be sponsoring the 25th annual Cayman Captive Forum this November 28th to the 30th in the Cayman Islands. We have been involved with the organization for about a decade, and enjoy attending the event each year (the warm weather helps!).

Cayman Captive Forum

The event kicks off with a golf tournament and then we’ll dive right into three days of educational sessions, receptions and networking opportunities. Our team is excited to see familiar faces and meet new industry professionals as well. Topics covered will include workplace safety, cyber risk, telehealth, regulatory updates, group captive strategies and more. This conference never disappoints and we’re happy to be a part of it.

If you’ll be at the Cayman Captive Forum, be sure to stop by booth #7 and say hello to our team, and enter our raffle! We’ll be in the back left corner of the exhibitors room and we’d love to chat with you.

 

State of the Industry: Cyber Risk & Captives

The threat of a cyber attack seems to increase with each passing day. With every new technology and security measure developed, somehow hackers always seem at least a step ahead. On a personal level, it’s scary – the possibility of a stolen identity or a hacked bank account is enough to keep you awake at night. However at the corporate level, there’s even more at stake: national security, the safety and livelihood of customers and employees, etc.Cyber Risk

We’ve all seen the headlines: Target, Yahoo!, Equifax, Verizon, and the list goes on. These companies made the news because they are large, global organizations with influence. However, it is not the size or scale of the companies that caused them to fall victim to cyber attacks. Gone are the days when tech firms were the only ones who really have to worry about hackers; the threat is very real for all kinds of organizations.

So as cyber attacks continue to grow in both frequency and impact, we wanted to ask our colleagues in Risk Management about their thoughts on cyber risk and insurance. Further, what does the commercial insurance market look like for cyber coverage? It is extensive? Are companies well protected? Are captives being utilized?

Through our proprietary survey and research, we uncovered some surprising insights on cyber risk and insurance. We can’t give it all away, but we can tell you that the commercial market for cyber insurance is new, imperfect and fluctuating, causing gaps in coverage for most organizations, some of which are questioning the validity of such a purchase. This creates an opportunity for captives in the cyber space, but you’ll have to fill out the form below to learn more.

 

Spring Spotlight: Prabal Lakhanpal

Apologies for the short break in programming, but we’re back! This week we’re highlighting one of our consultants, Prabal.

Captive insurance consultingTitle: Consultant

Joined Spring in: October of 2015

At work: Much of Prabal’s work at Spring pertains to captive insurance companies; he undertakes strategic projects to help find innovative solutions for clients of a variety of industries, sizes, functionalities, etc.

Outside-of-work: When not at the office, Prabal loves watching soccer. He’s also constantly trying to lose weight while at the same time scoping out and trying new and interesting restaurants. No easy task.

Favorite season: Prabal’s favorite season is spring (love when that happens), because that’s when, “the winter is behind us and the summer’s ahead of us…living in Boston, that’s one of the nicest feelings.”

Favorite flower: Prabal was stumped by this one and asked us to get back to him. He still hasn’t managed to come up with a favorite flower. Men.

Favorite food: “Anything spicy…my current favorite is Thai food.”

Favorite part about working at Spring: This was an easy one for him: Christine (me, the person writing this). And then also…“I like that I’m constantly challenged at work and that every project brings with it a unique set of hurdles to climb that means that I’m: a) always kept on my toes due to the dynamic nature of my work and b) fulfilled in terms of my intellectual curiosity. Further, we have an awesome team that functions as a great support system both inside and outside the office. And of course, Christine.” (He’s a real brown-noser…just wants to make sure I don’t use an unflattering picture of him. I have a few).

Current TV show binge: Along with the rest of the world, Prabal recently finished Game of Thrones. In addition he loves the show Suits and also recently rekindled his love for Robin Scherbatsky from How I Met Your Mother.

 

Voluntary Benefits: No Longer Voluntary for Employers (A White Paper)

The evolution of voluntary benefits – that is, those made available by employers but typically funded by employees – over the last five to ten years is truly significant. Once considered a burden that just wasn’t sought after enough by employees to be worth the effort, voluntary is now a critical component to many corporate benefits packages. It offers a win-win-win solution for employers, employees and vendors alike. It allows employees access to more customized products and services without the employer needing to shoulder the cost, in a time when rising healthcare costs are already keeping them up at night.Voluntary Benefits

In this white paper, we’ll take a deep dive into this market shift and uncover the advantages of voluntary programs for all stakeholders. We’ll also share tips and best practices for getting started – or maintaining – your voluntary benefits program, as well as point out potential pitfalls of voluntary plans and how to avoid them. We’ll discuss things like plan design, workforce demographics, ERISA, program communications and other factors that come into play.

Whether you’re already offering voluntary benefits or are considering starting, you’ll want to read our advice and guidelines. We’ve been helping clients navigate these tricky waters for years, and have picked up quite a few tricks of the trade along the way! Fill out the form below for your copy of the white paper, “Voluntary Benefits: No Longer Voluntary for Employers.”

 

 

Watch the Webinar: ERISA Considerations for Voluntary Plans

Once a bit of an afterthought, voluntary benefits are now quite mainstream and used as a tool for employers to provide top-notch, competitive benefits to employees while not increasing their costs. At a time when organizations are struggling to battle the rising costs of healthcare while retaining and recruiting top talent, many have recognized the value of a voluntary program in recent years. With such increased popularity, it’s important for employers to understand all the legal ramifications of their offerings.ERISA voluntary benefits

The Employee Retirement Income Act of 1974 (ERISA) is a federal law that outlines standards for certain pension and health plans. ERISA effectively guides what an employer is allowed and prohibited from doing when it comes to establishing, maintaining and publicizing these benefits. When it comes to voluntary plans, its relationship with ERISA is a bit murky:

  • which plans does ERISA apply to?
  • what is the safe harbor policy?
  • what are the consequences of violating ERISA for voluntary?

In this recorded webinar, I explain the answers to these questions and more. Failing compliance when it comes to voluntary and ERISA is likely a misunderstanding that your organization cannot afford, and it’s important to know the legal nuances that exist when talking about ERISA and voluntary benefits vs. other types. With many employers turning to voluntary programs to solve some of their benefits challenges, it’s critical that they are executed within the realms of the law.

Fill out the form below to learn all about this complex topic. I’ll outline key points and info and you’ll be able to listen to real questions asked by your peers.

 

Watch the Webinar: Time for a Captive Checkup?

Most of us stay on top of things like dental cleaning appointments and routine car maintenance without giving it much thought, but we’re afraid a lot of companies aren’t treating their captives the same way. Our team recommends regular “captive check-ups” every few years for a variety of reasons, and have a clear, proven system for taking organizations through this refeasibility process.

Spring Partner and Chief Actuary, Steven Keshner, along with our Senior Actuarial Consultant and property & casualty expert, Peter Johnson, led an educational session on captive optimization through

Captive Optimization

refeasibility studies. With a combined 40 years of experience in the insurance, actuarial and captive industries, the two have a wealth of knowledge to share, and we wouldn’t want you to miss it.

Fill out the form below to view and listen to our webinar, “Time for a Captive Checkup?” which was conducted live in September of 2017. You’ll take away valuable learnings, such as:

  • The importance of refeasibility and the different factors that make it necessary
  • A recommended, step-by-step refeasibility process including suggested strategies, modes of measurement, and how to piece everything together
  • Questions to be answered through your captive check-up
  • Resources for getting started

 

When Was Your Captive’s Last Check-Up?

You’ve had your P&C captive for years and it has continued to perform well throughout. So, what next? How do you capitalize on this success and build on your captive or rebuild an underperforming aspect of it? One word: Refeasibility. Okay, so ‘refeasibility’ isn’t really a word (according to Oxford Dictionary). At least it hasn’t been traditionally, but it is one that needs to be on the tip of the tongue of every captive owner. It is a word that has become somewhat synonymous with captive optimization and very accurately describes what captive owners need to do with an older captive: conduct a new (re)feasibility study.

The Importance of Refeasibility

As with all other business matters, your company’s captive needs and goals are likely to change over time, especially with new and emerging risks sprouting up frequently. Much like your family car, a captive should have a check up on a periodic basis. As a captive matures and companies evolve, captives need to be re-examined to determine if changes should be made to align with current organisational needs. Key reasons for this re-examination include the following:

  • Positive or negative experience
    • Example: unexpected adverse loss experience, such as supply chain interruption, resulting in business income loss not covered by insurance
  • Surplus release or addition
    • Example: surplus growth for the captive has been good and, as a result, there is now opportunity to add/expand coverages insured in the captive
  • Opportunities to add new lines of coverage (that perhaps didn’t exist or weren’t relevant before)
    • Example: Employee benefits or cyber risk
  • Change in the risk profile of various risks
    • Example: Litigiousness is on the rise in the insured’s industry and additional protection is needed
  • Changes in the regulatory environment
    • Generally speaking, regulatory changes have impacted business directly or indirectly, resulting in loss of revenue. This is a leading concern for small business owners.
  • Changes in law (such as those resulting from case law outcomes like the recent Commissioner vs. Avrahami case)

To address all these potential changes, our Spring CARE (Captive Analytical Risk Evaluation) team recommends a captive evaluate its risk appetite and risk exposure at least every ? ve years. Are you still writing the right lines in your captive? Are you still in the right domicile? Would a different structure be more profitable? Would other service providers make a difference? Have your claims changed signi?cantly? Have regulations changed over the years? All this and more can be answered with a good review of your captive by a professional consultant.

Captive optimisation starts with a captive refeasibility study. Every refeasibility study is different to varying degrees; the scope and resources required to conduct the study are dependent on the captive’s current structure, the events (if any) that triggered the study and the goals of the company. That said, through our Spring CARE system, we follow a carefully-constructed evaluation structure when our team works through the process of evaluating captive client’s existing captive. Generally speaking, we follow and recommend the following ? ow process in conducting a refeasabiity study, starting with goals and ending with measurement.

Goals StageRisk Transfer Vehicles

In this initial stage, it is important to focus on con? rming the goals and objectives of your captive, both new and old. Have the older goals been achieved? How have the goals changed over the years? This is a critical step in laying the groundwork and direction of your refeasibility project. Also critical at this early point is the collection of data. We consider the data to be collected here as not only the stats and facts of the captive, but also the more subjective (non-paper) data that can be gleaned through management interviews and informal stakeholder surveys. Finally, in any good refeasibility study, it is very important to identify changes in your risk pro?le. The risk matrix to the right shows the four classic actions a company can use to handle each of their risks (DeLoach 2000).

Typically,  high probability or high impact risks should be considered for insuring in your captive. Some of the most common risks to insure in captives are listed below . Emerging risks should also be considering in this assessment. For example, A new technology like driverless cars will create both risk and/or opportunities across various industries.

Coverages commonly written into captives:

Employee Benefits Risks Property & Casualty Risks
AD&D Auto Liability
Life/Loss of Key Employee Business Interruption
Long-Term Disability Directors & Officers Liability
Medical Stop-Loss General Liability
Voluntary Benefits Professional Liability
Retiree Benefits Property (deductible or excess layer)
Pension Buy-Outs/Buy-Ins Trade Credit
Workers’ Compensation
Commercial Policy Excluded Risk

 

Impact Stage

You want to be sure you have a clear idea of what you’re looking to accomplish, and to what extent. The Impact Stage of a refeasibility study involves looking at all the different pieces of tCaptive Optimizationhe captive puzzle to determine how they would be affected by the changes you’re considering. A few activities that a professional captive optimizer would look to accomplish in this phase would be:

  • Conducting an analysis of your risk financing optimization
  • Reviewing your current reinsurance levels and optimizing your reinsurance use
  • Stress testing of the captive with reasonable adverse case outcomes

Strategies Stage

It’s important to outline the methods you plan on utilizing in your captive refresh; in this Strategies Phase, a professional captive optimizer would ?rst analyse any additional lines of coverage that could be insured by your captive.

Secondly, a surplus management strategy would be developed. There are various considerations in appropriately managing the capital and surplus levels over the life of a captive, including average cost of capital, retention levels, reinsurance use, taxes and a number of others that a team of actuaries and consultants would review and develop strategy to address.

Structure Stage

Now that you know what you want to do and how, it’s time to take a closer look at how it will all work together in a logical structure. Market changes should give you some food for thought. For example, pure captives are increasingly changing to sponsored entities. In this Structure Stage, it is important to identify investment management best practices as well as the optimal collateral structure.

Measurement

Finally, all sound captive projects end with measurement. This is the time to collect new data and determine to what extent goals were met, and impacts made. A great deal of this stage relieCaptive Refeasibility s on the creation of solid industry benchmarks to measure current and future captive performance against. It is also important in the Measurement Stage for the optimization team to develop implementation plans based on their findings and make actionable recommendations for helping you achieve the goals that were established in the first phase of this project. At the conclusion of the measurement phase, a professional captive optimization team, such as our Spring CARE team, would produce a refeasibility report for your captive. In this report, all of the ?ndings of the refeasibility study are outlined and reviews along with the recommendations developed in this phase. These ?ndings can serve as a base line for measurement.

Conclusion

Regardless of how old or new your captive is, there are a number of internal and external factors that have changed since it was created. With all the changes taking place in the industry, it is a great time to have a professional come in and not only take a snapshot of how your captive is currently performing, but also help you project and strategize where your captive should be in the future. Now is a great time for a captive refeasibility study.

5 Potential Pitfalls of Voluntary Benefits & How to Avoid Them

You already read that Voluntary Benefits Are No Longer Voluntary for Employers. Now it’s time to dig deeper into Voluntary Benefits best practices- program design, what constitutes success when it comes to voluntary benefits and outline tips to prevent an ineffective voluntary program.

The term voluntary benefits was coined long ago when employers fully funded (or significantly subsidized) core benefits and voluntary benefits were an add-on, paid for by the employee through payroll deductions.  As the landscape changed, core benefits evolved to be partially funded by employers and partially funded through payroll deductions. As a result, many benefits became voluntary.

For today’s employees, it’s not as simple as core and voluntary; it’s about choice.  Employees need to balance what limited disposable income they have for all benefits, regardless of what they are labeled. Even still, the concept of core and voluntary resonates with employers as an industry norm, so it’s important to identify ways to avoid common pitfalls of voluntary program implementation:

  1. Think holistically
  2. Don’t forget about ERISA
  3. Consider enrollment options as a critical component in overall design
  4. Remember that education is key
  5. Help employees get the most from their plan

Think Holistically About Voluntary BenefitsVoluntary Benefits Tips

Many employers think offering voluntary benefits is like checking a box – something that can be done quickly and without much deliberation. However, programs without thoughtful preparation are rarely successful in terms of education, enrollment and satisfaction.  Voluntary benefits should be considered an integral part of the overall benefits package.  A strong offering should take into account various factors, including but not limited to:

Current population:

Although a one-size-fits-all approach does not and should not exist, employee demographics can help you pinpoint which products would be most sensible for your collective audience.  Generally speaking,                  those that are starting out in their careers have different priorities than those nearing retirement, and employees falling somewhere in the middle of the spectrum will have their own set of benefits needs as                well.  For example, accident insurance is more popular for families than for singles or empty nesters, while student loan repayment is more relevant for those in their 20’s and 30’s than for older employees.

Current benefit offering:

When considered in tandem, voluntary benefits can serve to protect employees and reduce their risk or perceived risk for various physical or financial troubles.  For example, introducing a high deductible                   health plan offering complementary voluntary products (i.e. hospital indemnity, critical illness, accident insurance) can help decrease the financial burden on employees.

Don’t Forget About ERISA Considerations for Voluntary Benefits

Voluntary Benefits Best PracticesVoluntary benefit programs may or may not be subject to the Employee Retirement Income Security Act of 1974 (ERISA), depending on how they are structured and supported by the employer.  ERISA provides important protections but can also pose constraints for employers and employees.  Assuming you do not want your voluntary programs to be covered under ERISA, you must be careful to manage enrollment and administration separately from your core benefit programs.  If you would like your voluntary plans to be subject to ERISA, then coordinating administration and enrollment will not be problematic; however, understand the potential impacts.  ERISA compliance and your potential fiduciary duties should never be an afterthought.

Consider Enrollment Options as a Critical Component in Overall Design

Our research affirms that employees better understand the offering and have higher enrollment when they participate in group meetings or individual meetings.  In addition, vendor partners are often willing to offer more competitive pricing and waive enrollment requirements if they can meet with employees directly or send them some type of material in the mail.

While some employers welcome the “free” education and enrollment, others are concerned about aggressive selling or having employees using work hours to meet with potential vendors.  If you think of voluntary benefits as part of your holistic offering, then leveraging work hours will be less of an apprehension when voluntary is an element of your complete attraction and retention tool.

The key is to think about the enrollment process as an essential design component of your voluntary program.  Ensure that decisions surrounding enrollment fit with the overall program strategy and make sense for your population.  Providing comprehensive enrollment with core and voluntary may be a best practice for your group.  This allows employees to make coordinated decisions regarding their contributions and programs.  It also enables you to offer complementary plans for optimal plan selection.  While that structure works for some, other employers feel employees have too many decisions to make during annual enrollment and prefer to stagger voluntary enrollment to allow more time for thoughtful decision making. There’s no right or wrong answer – each company and population is different.

Remember that Education is Important

Decision support tools have continued to evolve, providing employees with strong advocacy for traditional plans and voluntary benefits alike.  Although voluntary benefits are designed to be less complex and easier to understand, for some employees the language is new.  Summarizing the program(s) and sharing scenarios to help employees understand the products is often the best way to introduce a new plan.Voluntary Benefits Enrollment

Regardless of who funds the program, as the employer it is important that you educate your employees on the available offering.  Employees should not elect a benefit they do not understand and employers should not offer benefits that are not valued by employees, or that employers themselves cannot explain effectively.  Every dollar spent on voluntary benefits is money your employees are not spending on other necessities like monthly bills, student debt, groceries, emergency savings, or even 401k contributions; make sure they are knowledgeable about what they are buying and ensure that it’s a competitive product in the market.

Education can be facilitated in many ways including traditional employee meetings, brochures, benefit fairs, and onsite sessions with vendors.  At Spring we have also assisted clients with quick videos that provide the highlights of a program and generate interest.  These videos have been well received and employees are able to retain the information from a creative video more easily than a detailed presentation.  Videos are also shareable and can be viewed by family members who may be a critical part of the decision-making process.

Help Employees Make the Most of the Plan

Voluntary Benefits Vendors

After you have implemented a voluntary program and educated your membership it’s important that you continue to monitor the program and assist your employees in optimization.  Sometimes employees forget about the benefits they have available to them and continue to make monthly contributions to plans but they neglect to file claims because they don’t remember what they have elected.  A few simple actions can help your employees make the most of the plan:

  • Send a quarterly newsletter to all employees, or just those enrolled in voluntary benefits. This will give you the opportunity to remind them of the program benefits.  It can also help facilitate changes (i.e. enrolling spouses, children) and provide an opportunity to ask questions.
  • Partner with your vendors. For example, if you have a purchase program in place, they often run specials and send postcard reminders.  Take advantage of those specials!  Perhaps you could run a joint wellness campaign linked to specials on health equipment.  Ask if they would be willing to raffle off something like a treadmill or vacation to align with your wellness strategy.
  • Remind your employees to file claims. Even if you cannot leverage actual data, you can send a reminder at the midpoint of every year for wellness visits with a link to the claim form.  For example, most critical illness and accident plans offer a wellness rider – find out how many employees use that benefit and try to increase that percentage.
  • Ensure the program remains competitive from a pricing and design standpoint. Employees should feel assured that the benefit they’re purchasing through their employer remains is top tier.

Taking the above factors into account will help you establish a voluntary benefit offering that is accessible and relevant to your employees and that is well worth the effort on your part. Today’s workforce has come to expect more than just the basics when it comes to benefits, and voluntary products allow you to diversify your benefits package, keeping you competitive with market standards without any significant cost increase.

However, it is not enough merely to offer voluntary products and services – they need to be the right ones for your population, they need to be communicated effectively, they need to be readily understood, they need to account for regulations like ERISA, they need to be fully utilized and they need to be rolled out in a way that makes sense for your organization. By covering these bases you’ll be able to avoid the most common pitfalls and successfully offer a valued voluntary benefits programs.