JUN 8 – 10, 2015

www.bermudacaptive.bm

Title Slide

JUN 8 – 10, 2015

www.bermudacaptive.bm

Getting Employee Benefits and Getting Employee Benefits and Pension Programs into your CaptivePension Programs into your Captive

Microsoft Update – Benefits CaptiveMolly Seaburg, Senior Risk Manager, Microsoft Corporation

The Microsoft IBC Program• Fronted by Generali and Maxis (Maxis is a Met

Life and Axa global partnership)

• Limits are set locally and individually in accordance with local regulations/requirements

• Coverage parameters set in consultation with local management

• Territory – Worldwide excluding the USA

• Separate US programs in place via VT branch

• Life, Disability, Accident, Medical and all other

purchased Employee Benefit programs

• Local benefit policies are placed with a local insurer who is part of the captive network

• The local insurer will provide administrative services only (ASO).

• The Microsoft captive assumes 100% the risk of the risk where possible (similar to self-insurance)

• The local insurer will pay all claims covered under the local policies

• Annual renewal rates will be set by Orcas (Microsoft’s captive)

Captive Network(Fronting Insurer)Captive Network(Fronting Insurer)

Microsoft Captive (Orcas)(insurance company 100%

owned by Microsoft)

Microsoft Captive (Orcas)(insurance company 100%

owned by Microsoft)

SubsidiaryCountry X

SubsidiaryCountry Y

SubsidiaryCountry Z

Local InsurerCountry X

Local InsurerCountry Y

Local InsurerCountry Z

Reinsurance Treaties

Local Policies

International Reinsurance Treaty

Employees do not see captive arrangement

About 70 other companies worldwide currently use international benefits captives including 3M, DHL, Nestle, Alcoa, Dow Chemical, Shell, Coca-Cola, and GM

Stakeholders & Roles

Microsoft Captive

Risk Management

& Captive Consultant

Global Benefits & Intl

Comp and Benefits

Subsidiary HR and GHRO

Underwriting and investment, manage

captive insurer network relationship

Subsidiary GPG

Benefit design, migration and

renewal SMEs to subsidiaries

Implement and manage local insurer

relationship

Support HR and local insurer relationship,

drive contract compliance

Fronting & Local Insurers

Policy issue, benefit enrollment, maintain & manage benefit records,

assess & pay claims

5

IBC Project Overview

• The project is jointly sponsored by Global Benefits and Risk Management

• We have implemented a captive arrangement for certain international benefits to achieve greater cost efficiencies & flexibility. The project includes:

– Moving all insured Life, Disability and Accident policies into the captive where legally permissible

– Encouraging movement of insured medical policies to the captive – Retirement plans will not be considered for the captive

• This was a multi-year project; CY11-CY14

5

Year 1Year 1

CY 2011CY 2011

Year 2Year 2

CY 2012CY 2012

Years 3 - 4Years 3 - 4

CY 2013 – CY 2014 H1CY 2013 – CY 2014 H1

Global Implementation PlanGlobal Implementation Plan

• Generali existing pool converted to full captive arrangement

• Evaluate potential need for additional fronting insurer

• Non-pooled countries’ Life, Accident and Disability policies moved to captive arrangement

• Non-Generali pooled Life, Accident and Disability policies moved to captive arrangement

• Include medical policies as applicable

6

Why Implement a Captive?Local Subsidiary:•Cost savings of 5%-20% for local subs on international benefits spend by removing insurer risk charges and profits and reducing the need for brokers•Greater flexibility in underwriting and removing policy exclusions and restrictions•Increased leverage with local provider

Before Pooling After Pooling After Captive

Insurer Risk Charge

Insurer Profit

International Pool Dividend

Insurer Admin Charge

Insurer Profit

Commission

Claims

Commission

ClaimsClaims

Insurer Admin Charge*

Insurer Risk Charge

Insurer Admin Charge

Pre

miu

ms

Pre

miu

ms

Corporate:•Improved governance by improving visibility and centralized control of benefit pricing and plan design •Diversification of the risk of our existing captives and supports corporate initiative to move toward captive-centric framework

* = admin charge includes any insurer profit as well.

Why take on EB “Risk”

• Reduce structural cost at the business unit level

• To monitor the costs charged to the Parent Company units by local fronting insurers, consultants and brokers

• Risk of catastrophic loss

– Captive reinsurance can manage and cap the cost via reinsurance

• No change in benefit offering for employees• Instant cost savings by eliminating;

– Profit Margins– Risk Charges– Commissions– Other Charges

• Eliminate need for stop loss coverage– Manage risk in captive with underwriting assistance

Countries in Captive as at Q1 2015

Number of countries to date – 75– 53 Individual Countries covered

– 22 Countries covered in group plans

* Transitioned countries highlighted in Green

Microsoft local subsidiariesMicrosoft local subsidiaries in over 100 Countries Worldwidein over 100 Countries Worldwide

Microsoft Captive Results to Date2014 Total Annual Premium

(By Line of Cover)2014 Total Financial Efficiencies/Savings (By Line of Cover)

• Based on the program experience for 2014 of a Total Annual premium $42,651,976

• Total of 86 countries included at 2014 (including regional plans)

• Total new savings for 2014 of $830,382 and recurring efficiencies of $4,843,492

• Since 2011 Granite/Orcas has maintained savings/efficiencies of 10%-13% of total annual premium

• Reduce the Cost of Our Insured Plans– Unit HR and Unit Finance Responsible for Risk/Claim Management

• Educate employees• Introduce co-pays/deductibles• Analyze cover provided;

– Is it market practice?– Can it be amended?– Analyze the big cost drivers (i.e. special clinics)

– Who can help in the loss reduction program• Utilize local insurer and bring pressure to bear on them to assist in claim management• Share experiences and good practice between business units

• Data Analysis– Drill down into claim data

• Analyze trends– Local– Regional– Global– Demographic split– Gender issues

• Find root causes

– Using this data• Amend cover to influence/nudge employee behavior• Implement wellness programs focusing on key local issues

What Next?

• Use captive to aid in Data Privacy management• Ensuring local procurement support

Looking Forward