Brian Quinn, managing director at Granite Management Limited in Bermuda, discusses the evolution of employee benefits in captives.

What role do you play with captives and their employee benefits programmes?

We at Granite pioneered development and enhancement of employee benefit captives leveraging our team and my own experience from when I started my first employee benefits captive project as a General Motors risk manager in the late 1990s.

We pride ourselves on our unique position in the international employee benefits area, whilst we are a fully licensed, regulated and well respected captive management company, we have developed a core specialised practice for advising and managing employee benefits in a captive.

The Granite team’s in-depth knowledge in international employee benefits lets us offer unique services in the market from underwriting of global employee benefits risks, management of the benefit promise, processing and booking complex specialised accounts, managing communication processes, connecting HR and risk management together, to ensuring compliance with our clients’ global benefit strategy while delivering the financial objectives set by the captive and corporate treasury.

In your 20 years of employee benefits experience, how have programmes changed or evolved?

I started with employee benefits captives when they were in their infancy and as a corporate employee was the key motivator in the set up and implementation of the first US IEB captive arrangement, for my former employer and current client General Motors.

At the outset, we had numerous challenges from poor reporting, accounting, underwriting and a general lack of good coherent data.  Our main focus was financial savings and elimination of frictional costs.

Our focus today has been enhanced to improving the governance control, and using client’s enhanced data to better manage the employee benefit spend, analysis of the root cause of increasing costs and endeavoring to control high medical trend rates and implementing more efficient return to work programmes on disability.

Our relationship and partnership with key fronting networks in the market has allowed us to work in partnership with the networks to improve the data quality which enabled our clients to go to the next level and to achieve the enhanced objectives of our client base.

We at Granite are proud to have been at the forefront of the many improvements and efficiencies in the reporting and data being provided by the fronting networks which has only served to enhance the benefits of a captive funded employee benefits programme.

Are you seeing existing programmes in captives grow?

Yes, existing employee benefits captives continue to grow and expand and in particular the premium volumes for medical insurance globally are increasing at worryingly high trends.

Clients are now looking to use their ownership and management of the data, via the captive, to try and break this trend and manage the cost of their global medical programmes downwards, reduce absenteeism and improve employee experience, by implementing targeted wellness programmes both globally and locally to target specific identifiable issues.  This has been made possible with the improved medical reporting from the fronting networks, which we continue to develop with them.

What obstacles remain for corporations when they consider adding employee benefits to their captive?

There really should not be any, as employee benefits captives are now a proven valuable tool for both risk management and HR in managing a key internal risk.  Most of the barriers that I hear are perceived rather than actual.

Successful implementation and growth of captive requires HR and risk management teams working in partnership, ensuring that they work together and understand the roles and priorities/objectives of the other.

We at Granite have implemented a multitude of IEB arrangements over the years and a core competency for us is connecting the risk management and HR teams together and essentially becoming an interlocutor (go-to person) for our clients between these two internal staffs and with their local/regional business units.

How much potential growth do you see among the captive community for adding EB?

I see tremendous growth opportunity and whilst in the past an employee benefits captive was only considered viable for the very large multinationals primarily for financial savings, whilst this still holds true, the prevalence of medium sized and small multinationals is a new development, as they have realised the additional great benefits of using a captive, to control their global benefits, achieve costs savings/efficiencies and improve governance and compliance.

While these smaller companies have to be more prudent on their risk retentions at the captive or cap their exposures at a realistic level (both for fronting insurer security needs and their own protection of the captive assets), the risks are far outweighed by the significant advantages that accrue to their companies.

Companies globally are beginning to see that all employee benefits risk is very manageable and falls perfectly within the role of their captives, effectively managing and controlling predictable risk and eliminating frictional cost.