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April 2006 Pulse Survey Analysis:
Employee Benefits in Captives

 In partnership with, Towers Watson conducted this pulse survey to take a look at the issues involved in reinsuring your captive.

This analysis was written by analysts at Towers Watson.

The April Pulse survey queried respondents as to their interest and activity in looking into employee benefits in through their captives. We solicited specific responses from single-parent captives only, as generally group captives would not normally insure employee benefits (EB) for their members. Single-parent responses were 25 of the 34 total respondents who answered the survey.

When asked how seriously they have been in considering placing EB into their captive, slightly more than half had done some reading on the subject or nothing at all. The majority, or 35.3%, said they had done some serious reading about the subject. A lesser number, 17.6%, said they had not done any reading at all or had done some light reading.

Over 40% had taken more serious action in looking into the matter: 5.9% said they are considering doing a feasibility study of placing EB into their captive; 11.7% said they had discussions (including other departments within their organizations) about this; another 11.7% have engaged a study to evaluate the feasibility; an equal number have finished the study and are looking to place some EB into the captive; and finally 5.9% already have placed EB into their captive.

No one said they had finished the study and decided NOT to place any EB into their captive.

When asked what EB benefits are the best candidates to put into a captive, participants’ responses were:

  • Group term life (52.9%)
  • Disability (47.1%)
  • Medical for active employees (29.4%)
  • Non-U.S. benefits (11.8%)
  • Non-qualified benefit plans (11.8%)
  • Post-retirement medical (5.9%)
  • Not sure (17.6%)
  • No opinion (5.9%)
  • Pension or termination payments (5.9% each).

What are the primary three reasons for seriously considering using a captive to write EB?

  • Cost reduction (56.2%)
  • Improved cash flow (50.0%)
  • Control of assets (31.2%)
  • Tax advantages (31.2%)
  • Improved centralized program control (25%)
  • Improved claims control (18.8%)
  • Improved data (12.5%)
  • Improved underwriting (6.2%)
  • No comment/not sure (12.5%)

This topic was the focus of the lead article entitled “EB in Captives: Finding the Savings”, in the April issue of the Captive Insurance Company Reports.

Our comments: We compared the Pulse results to a Towers Watson 2004 survey on the same topic, which asked HR people, and found similarities in the level of interest by captive owners. In the 2004 survey, 38% of 60 respondents had implemented or were considering implementation of benefit insurance transactions in their captive. An additional 35% indicated that the topic would be considered in the next two to five years. Some respondents in the 2004 survey did indicate a lack of interest in EBs for their captives (20%), primarily because they were unsure of the advantages or had other pressing short-term priorities

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