Health insurance premium in the Middle East has grown faster than the global average, thus offering immense scope for the captive insurance in the sector, according to Willis Towers Watson, a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth.
“Our own global medical trends report from earlier in the year shows that the average health insurance premium in the Middle East increased at a higher rate than the global results, which were 7.5% in 2014, 8% in 2015 and is estimated to be over 9% this year,” said Steve Clements, the Health & Benefits Leader at Willis Towers Watson Middle East.
He said the savings available to companies who run successful benefits captive can be significant so as companies in the region look towards alternative solutions to mitigate rising insured employee benefit costs, exploring the feasibility of using a captive could be worthwhile.
Currently, organisations are using their captive vehicle purely to save money on their annual employee benefits bill.
The use of captive insurance companies to fund employee benefit insurance continues to evolve globally as organisations look for new ways to manage rising costs, the report said.
Many have noted captives’ importance as a tool in benefit cost management and successful benefit captives are often able to stabilise and slow down the increase in benefits costs in an environment where medical costs continue to increase by identifying and addressing the key cost drivers, according to Clements.
“Whenever an employer is planning to use a captive, they have to ensure that it is structured in a way that is compliant with the local regulations of each country in which it will operate. This is particularly important in regions like the Middle East where there are specific rules relating to the provision of mandatory health insurance in countries like the UAE and Saudi Arabia,” he added.
A captive insurer is an insurance company that is wholly owned and controlled by its insureds, in this context an employer that wishes to insure its employees; its primary purpose is to insure the risks of its owners, who can benefit from any of the captive insurer’s underwriting profits.
The proactive risk management was also reflected in the influence employee benefit captives have over pricing, with half (50%) indicating that their captive had full determination or significant influence over pricing rather than relying purely on local insurers’ underwriting.
In the future, nearly half of the employee benefit captive users (47%) indicated they are also considering a captive pension transaction, either in the next 3-5 years (41%) or within the next 12 months (6%), the report said.