IGP Tranini g Workshop IGP’s Captive Capabilities...S&P AA- rating (current as per February 29,...

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IGP Training Workshop IGP’s Captive Capabilities

IGP EMEA Seminar Windsor, May 31, 2016

Brian D. McCarthy AVP, IGP Boston

Key Topics

IGP Experience & Organisation

IGP’s Captive Capabilities

Implementation Process

Implementation & beyond

How are we organised? Why is

IGP your best choice?

• One of the world’s leading multinational pooling networks

• Systems and procedures in place since 1967

• Part of John Hancock U.S.A. (Manulife Financial Corporation is the ultimate parent)

• Offices in Boston, Brussels, Singapore, Tokyo & Waterloo, ON

• Works with independent Network Partners

• John Hancock participates in the risk for most contracts included in IGP

• Broad global reach: Providing employee benefit solutions

in over 70 countries

Your Benefits Mean the World to Us!

Expertise and Stability since 1967

• Manulife Leading Canadian-based insurer One of the largest life insurance companies in the world based on

market capitalization S&P AA- rating (current as per February 29, 2016)

• Both Manulife and John Hancock are internationally recognized brands that have stood for financial strength and integrity for more than a century.

Network Background

• IGP systems geared to captive retrocession through reinsurance system Reinsurance Agreements in place with Network Partners Assuming reinsurance on more than 5,000 employee benefits programs

in over 70 countries. Retro-ceding reinsurance on hundreds of employee benefits programs

• Involved in captive reinsurance since 1981

• Currently 10 captive arrangements in force with +/- $ 30 mln premium (per 1/1/2016)

Systems and procedures in place for years

Captive Reinsurance

• IGP Network Partners Fronting insurers Competitive & tailor-made quotations / Renewal recommendations Reinsurance Agreement remains in force Transferring premiums and reporting claims to IGP

• John Hancock Contractual partner to the Captive

‐ Retrocession Agreement ‐ Collateral of 110% of ceded premium & reserves required if premium transfer

Network Leader ‐ Coordinates & informs Network Partners

Third Party Administrator ‐ Premium Transfer ‐ Claims reimbursement ‐ End-of-Year Settlement ‐ Monitoring Performance

Roles in a Captive Arrangement

• IGP Reinsurance Agreements between John Hancock and the IGP Network Partners continue to apply Local plans are insured with Network Partners, and reinsured to John Hancock

• One single Retrocession Agreement between John Hancock Life Insurance Company (U.S.A.)

‐ subject to the laws of the state of Massachusetts Client’s Captive

• Covers... Inclusion of coverages Transferred/Retained Premium coverage International Year End Statements & Settlements Minimum Requirements for Transfer of Premium Initial Reports and Other Data Duration & Termination

Retrocession Agreement

• Local plans are insured with strong local IGP Network Partners Financially solid, reliable and market-leading insurance companies Quality of service Local performance indicators & service standards IGP influence

• IGP Reinsurance Agreements between JH and the Network Partners continue to apply

• One single Retrocession Agreement needed between John Hancock Life Insurance Company (U.S.A.) and Client’s Captive

Your Best Choice for Captive Reinsurance

Key Topics

Pooling versus captives – risk

ceding only or risk ceding with

premium transfer

• Life, disability, medical, accident No old age pension, insurance/pension

• IGP Retro-Cedes Risk Year end accounting & settlement Liberalized underwriting (rates, IGP limit) Captive receives a risk charge

• IGP Retro-Cedes Risk and Passes Premium Above, plus… Net risk premium passed to Captive Quarterly settlement of claims No IBNR reserves (if no legal or other restrictions)

• Captive can have mix of contracts with risk ceding only and contracts with risk ceding & premium transfer (based on level of contract premium)

• Residual pool kept in force for contracts not eligible to go into Captive

In Short

• IGP Retro-Cedes Risk No ‘cash’ transfer throughout the year Year end accounting & settlement Liberalized underwriting Captive receives a risk char

• IGP Retro-Cedes Risk and Passes Premium Above, plus… Net premium passed to Captive Quarterly settlement of claims Reconciliation at the end of the year No IBNR reserves (if no legal or other restrictions)

Risk Ceding Only vs Risk ceding with Premium Transfer

• Pooling Subsidiary pays premium to Network Partner Network Partner pays out claims Network Partner sends Pilicy Year End Report (PYER) to JH Annual Settlement between Network Partner & JH

Pooling vs. Captives

• Captive with Risk Ceding Subsidiary pays premium to Network Partner Network Partner pays out claims when claim occurs Network Partner sends PYER to JH after end of policy year Annual Settlement between Network Partner & JH Annual Settlement between JH & Captive Quarterly reporting is optional

• Captive with Risk Ceding General requirements

‐ Fulfil criteria of an IGP self-experienced account ‐ No outstanding deficit in the associated IGP pooling account ‐ Retrocession Agreement ‐ Credit risk assessment

Eligible plans ‐ Life, disability and medical

Extra IGP cost for the captive ‐ Depends whether quarterly reporting is requested

• Captive with Risk Ceding In summary

‐ Captive takes risk ‐ No ‘cash’ transfer throughout the year ‐ Year end accounting & settlement ‐ Liberalized underwriting ‐ Captive receives a risk charge

Captive Arrangements with Risk Ceding Only

Subsidiary IGP

Network Partner

John Hancock IGP Network Leader

Captive

Parent

Subsidiary

IGP Network Partner

Premium

Claims Coordination

Premium

Claims

Share of Risk, Risk Charge & Margin

Share of Loss

Reinsurance Agreement

Share of Loss

• Captive with Risk Ceding and Premium Transfer Premium (annually):

‐ Net Premium Transfer Form ‐ Subsidiary pays premium to Network Partner ‐ Network Partner pays net premium to JH ‐ JH pays net premium to Captive

Claims (quarterly): ‐ Network Partner pays out claims when claim occurs ‐ Quarterly Claims Reimbursement Form (aka. bordereaux) ‐ JH reimburses Network Partner ‐ Captive reimburses JH

End of year reconcilitation ‐ Annual Settlement between Network Partner & JH ‐ Annual Settlement between JH & Captive

• Captive with Risk Ceding and Premium Transfer General requirements

‐ No outstanding deficit in the associated IGP pooling account ‐ Retrocession Agreement ‐ Premiums paid annually in advance ‐ > 2,000 lives insured with IGP Network Partners ‐ > USD 1 million annual net ceded risk premium ‐ > USD 25,000 net ceded risk premium per plan ‐ 110% Collateral Requirement (Trust or LOC) ‐ Credit risk assessment

Eligible plans ‐ Life, disability and medical

Extra IGP cost for the captive ‐ IGP captive administrative charges (local and international fees)

• Captive with Risk Ceding and Premium Transfer In summary

‐ Captive takes risk and profits from cash flow ‐ Quarterly settlements ‐ Liberalized underwriting ‐ Captive receives a risk charge ‐ Additional captive charges to cover extra administration

Captive Arrangements with Premium Transfer

Subsidiary IGP

Network Partner

John Hancock IGP Network Leader

Subsidiary

IGP Network Partner

Premium

Claims

Premium

Claims

Net Premium

Quarterly Claims Reimbursement

Net Premium

Captive

Net Premium

• Medical claims fund maintained (aka. medical escrow account) For contracts with premium transfer 25% of medical premium for immediate claims payment by Network Partner

• No charge on release of reserves IBNR Reserves released upon agreement of Network Partner and

where legally possible Reserves for benefits in course of payment, e.g. spouse’s and orphans’

pensions, LTD ‐ Released to Captive if allowed by law/regulation ‐ Replacement asset may be required

Reserves

• No IGP Limits Full risk borne by Captive Captive seeks external reinsurance/stop loss protection Subject to credit risk review

• IGP Limits Standard IGP limits

‐ Risk up to country specific IGP limit transferred to Captive ‐ Premium for cover in excess of IGP limit is not transferred

Increased IGP limits ‐ Subject to approval of IGP and its Network Partners concerned ‐ Uniform IGP limit of USD 750,000 per contract or higher

IGP Stop Loss protection possible

• IGP cannot provide catastrophic cover 22

Risk Management

Key Topics

Implementation process, including

evaluation, selection, considerations &

decisions to be made prior to

implementation.

Implementation

• Role of the IGP Account Team: “Single” point of contact for the client & consultant Proactively support client & consultant in line with the set Captive (&

Pool) Strategy Co-ordinate action plan, reporting, proposal requests with client,

consultant and IGP Network Partners Maintain regular communication with client & consultant:

‐ Quarterly reporting ‐ Regular review meetings

• Supported by dedicated Captive Specialist Team

A Dedicated Account Management Team

Project Management Project Management Project Implementation

Meet The IGP Team Captive Specialist Team

Administration Underwriting Legal

Brian McCarthy

Assistant Vice President

Tamara Laanen

Director Sales & Service

Inge Luyten

Marketing Executive

+1 617 572 86 55 bmccarthy@jhancock.com

+32 2 775 29 61 tamara.laanen@igpeurope.com

+32 2 775 29 41 inge.luyten@igpeurope.com

Michael Fontaine Director Administration Services

David Bisch Director Technical Services

Deborah Griffin Senior Associate Counsel

+1 617 572 40 11

mfontaine@jhancock.com

+1 519 747 7000 (Ext 245 941)

David_Bisch@manulife.com

+1 617 572 99 13

dgriffin@jhancock.com

• Set-up Captive Project Team Members from Parent, Captive, Consultant and IGP Define roles & responsibilities Project Team communication: periodic calls, monthly meetings

• Identify key-project streams, tasks and deadlines Risk management

‐ Reinsurance %, per life limits etc. Legal documents

‐ Retrocession Agreement, Collateral, ... Country approach Captive Reporting

• Involves constant monitoring

Implementation

• Risk Management Which lines of business can be underwritten by the Captive? Reinsurance percentage to be assumed by the Captive Risk ceding only or risk ceding and premium transfer? Residual pool? Risk limitations

‐ At local level: standard IGP limit, uniform limit, no limits? ‐ At international level: stop loss, catastrophic cover?

• Robust coporate communication plan Buy-in from top managment is single most important determinant of success Long term strategy involving active management by the corporation with clear

objectives and priorities HR, finance and risk management may all be involved and will need to work together Strong communication lines between parties and with local affiliates Key component for successful engagement

• Reporting requirements

Considerations & Decisions

• Analysis of current employee benefit plans Check eligibility for inclusion in Captive Arrangement Check eligibility for premium transfer Alignment of local renewal dates? Plans that need to be unbundled? In case of risk ceding with premium transfer:

‐ Mode of premium payment to be changed to annually in advance ‐ Removal of local profit sharing to maximize cash flow? ‐ Removal of brokers’ commissions?

Considerations & Decisions

• First – Set Up: Captive / Parent credit risk review Captive’s risk tolerance: stop loss, limits Signing of Retrocession Agreement

• Second – Local Implementation Communication to local affiliates about new terms & conditions

‐ MOP, renewal date, LPS, commissions, ...

Transition year to switch local plans?

• Regular calls

Action Plan

Key Topics

Project management, performance management,

renewal processes & captive reporting

Implementation … & beyond

• Sample IGP Captive Reports SAMPLE - 20XX ABC Re IGP Captive Report - Country XYZ

Subsidiary ABC 01.xls SAMPLE - 20XX ABC Re IGP Captive Combined Report.xlsx Tutorials are available

• Sample IGP Trackers IGP Captive Project Country Status Tracker IGP Captive Annual Timeline

• Password Protected “Lockbox” Login: Password: https://www.igpinfo.com/igpinfo/clients/xxx

IGP Captive Reporting & Tracking

• Renewal Pricing Recommended to start 4 months in advance IGP Network Partner will recommend rates Clear communication from/to all parties involved IGP Captive Renewal Rates Tracker.xlsx

• IGP Underwriting Support

• Wellness & Wellbeing Capabilities

• Claims Management via Quarterly Bordereaux

Renewal Process

• Performance actively monitored by John Hancock as “Network Manager”

• Network Service Standards relate to: Responsiveness Dedicated IGP resources Delivery of reports: timelines and accuracy Confidentiality Preparation of IGP Country Profiles and marketing materials

• Escalation processes are in place

IGP Performance Management

Implementation with IGP

• Local plans are insured with strong local IGP Network Partners

• One single Retrocession Agreement between JHUSA and Client’s Captive

• Strong Account Development & Captive Team

• Main Captive Differentiators: No Cash Calls Individual and Immediate Premium Transfers Tailored per country solutions possible (no reporting / RC / PTR) Reinsurance Agreements already in place Very detailed reporting (with tutorials) & trackers

Your Best Choice

Questions & Answers

Thank you for your attention! Key Topics We Discussed:

How are we organised? Why is

IGP your best choice?

Pooling versus captives – risk

ceding only or risk ceding with

premium transfer.

Implementation process, including

evaluation, selection, considerations &

decisions to be made prior to

implementation.

Project management, performance management,

renewal processes & captive reporting

IGP Tranini g Workshop IGP’s Captive Capabilities...S&P AA- rating (current as per February 29,...

Documents

Transcript of IGP Tranini g Workshop IGP’s Captive Capabilities...S&P AA- rating (current as per February 29,...

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