Is an employee benefits captive right for you?

Why Asia employers should rethink benefits financing

Medical trend rates in Asia are forecast at 11.7% in 2027, nearly five times the rate of inflation. Employers cannot address this pressure indefinitely by just trimming benefits or shifting costs entirely to employees.

Some organisations are therefore exploring alternative financing models, such as captives, to gain greater control over how risks are financed, governed and managed. According to Marsh’s 2026 Captive Benchmarking Report, the number of captives worldwide funding medical benefits grew by double digits in 2025.

How can a captive strengthen your employee benefits program?

Compared with local insurance or pooling solutions that combine local policies and share risk, which largely depend on insurer pricing and market cycles, a captive may help organisations:

Improve financial control by retaining selected risks and the associated underwriting margin.
Use data more effectively by owning their claims data, gaining greater visibility into their claims experience and workforce health risks.
Support greater flexibility by enabling tailored coverage that may be difficult to obtain through traditional insurance.

Two captive structures are particularly relevant to employee benefits:

Structure	What it is
Cell captive	A structure that allows an organisation to access an existing captive for its employee benefits needs, offering a lower-barrier way to improve financing control and explore tailored coverage. Each organisation’s premiums, reserves, and liabilities are ring-fenced from those of other cells.
Single-parent captive	A standalone insurance company established and owned by an organisation to retain and manage selected employee benefits risks. It is suitable for large organisations and offers greater control over financing and benefits design.

Six questions to ask before considering an employee benefits captive

While premium volume can provide a starting point, the decision about the most appropriate financing strategy should be data-driven and insights led. Evaluate your organisation’s needs against these six indicators:

Governance and infrastructure: Does your organisation have an existing captive, or the capital, governance, and operating infrastructure that could finance employee benefits?
Benefits premiums: Are your employee benefits premiums increasing significantly each year, despite traditional renewal negotiations and cost-management measures?
Protection gaps: Are there gaps in your existing benefits coverage because employee needs have evolved or certain benefits are hard to insure? Or do you want distinctive and tailored benefits to attract and retain talent?
Gain control: Would greater control over claims data and experience help you better understand employee needs, improve program design, and manage benefits costs?
Establish governance: Could a centralised program across business units, markets, or regions provide greater scale, consistency, and stability in benefits financing?
Scale across markets: Does your organisation have sufficient scale across multiple markets, reliable claims and premium data, the necessary governance, and risk appetite to retain part of your benefits risk over the long term?

What to do before setting up an employee benefits captive

If the answer to most or all of the questions above is “yes”, organisations should consider the following steps:

Establish a baseline: Review premium and claims history, benefits lines, renewal costs, high-cost claims and frequency, and local regulatory requirements to understand the current program and identify areas of opportunity.
Align HR, finance, and risk teams early: Ensure these stakeholders agree on the objectives, risk appetite, funding approach, and governance model as the decision affects employee experience, P&L ownership, capital, and oversight.
Model the economics with a feasibility study: Assess retained-risk scenarios, reinsurance needs, capital requirements, and operating costs, to decide whether, and how, alternative financing can improve financial resilience and employee experience outcomes.

The outcome should be a clear, data-backed decision on whether a captive can improve financial resilience and employee outcomes.

Case study: How a multinational used its captive to enhance benefits and strengthen global governance

Challenge

A multinational pharmaceutical and biotechnology company with more than 200,000 employees across 80+ countries wanted to assess whether its existing captive could finance employee benefits more effectively.

The company needed a robust business case to support internal decision-making, but its incumbent captive manager had limited experience in global employee benefits.

Solution

Marsh conducted a feasibility study to assess the economic, operational and risk management implications of using the existing captive. The analysis enabled the company to make an informed decision and facilitated internal discussions that led to approval.

Marsh then supported the implementation, working with the incumbent captive manager on licensing and business-plan submissions, selecting global fronting partners and transitioning the policies. Marsh also independently priced each policy for captive underwriting approval.

Outcome

Within 18 months, the company brought the employee benefits programs of more than 40 countries into its captive, representing over US$30 million in premium. The program helped deliver:

Captive rates that were often 5-10% below insurer rates in a hardening market.
Enhanced local benefits and broader coverage.
Greater flexibility to review exclusions and address liabilities not readily covered in local markets.
Stronger central governance and simpler global benefits administration.

Frequently asked questions

What are the common employee benefits financing options?

Common options include local insurance, multi-pool, multinational pooling, and captives. The right fit depends on organisational size, premium volume, and how centralised your program is.

How do multi-pool and multinational pooling work?

Multi-pool arrangements combine risks across plans from multiple organisations, while multinational pooling combines results from local policies across the countries in which a single organisation operates to improve coordination and share risk. Both remain subject to local insurer pricing, policy terms and market conditions.

What is an employee benefits captive?

An employee benefits captive is a structure in which an organisation retains and manages part of its employee benefits risk instead of transferring all of it to a third-party insurer. This may be through a single-parent captive or a cell captive.

How is a captive different from pooling?

In pooling, local policies remain with insurers and results are combined. In a captive, the organisation retains part or all of the risks and uses its own claims experience to inform cost management and benefits design.

How many employees or countries are needed?

There is no single threshold. Scale across markets, reliable claims and premium data, risk appetite, and governance matter more than premium volume alone. A feasibility study tests these factors against your numbers.

Does a captive guarantee savings?

No. Organisations should view captives as a long-term risk management strategy, instead of a short-term cost-savings fix.

What types of employee health and benefits insurance lines can be written through a captive?

Risks such as medical, life, and disability or even dependents can be included and written within a captive, subject to local regulation and fronting arrangements. A feasibility study can help confirm which lines suit your program.