When an Employee Benefits Captive is the Right Solution

When an Employee Benefits Captive is the Right Solution
April 7, 2026 8 mins

When an Employee Benefits Captive is the Right Solution

When an Employee Benefits Captive is the Right Solution

Amid rising costs and a desire for more health data insights, companies are increasingly turning toward captive arrangements for their employee benefits. Here are the drivers of this movement, and how employers can decide if a captive is right for their employee benefits.

Key Takeaways
  1. Rising medical costs globally are prompting many organizations to assess strategies to mitigate cost increases. One solution may be setting up a captive or using a cell captive for employee benefits.
  2. There are different types of captives depending on organizational goals with varying levels of complexity and flexibility. Conducting a feasibility study is the first step.
  3. One of the most powerful benefits of a captive is getting access to claims data and being able to use that to understand workforce health risks and behaviors.

In the past several years, there has been increasing interest among multinational companies in employee benefits captives. There are three main sets of drivers behind the push to create employee benefits captives that all revolve around a central theme of control.

  1. Financial: Controlling costs is one example, but beyond costs, having the funds that would ordinarily go toward premiums can help companies build a substantial financial asset under their control.
  2. Flexibility: Having a captive allows employers to tailor benefits to local workforce needs and rollout strategic priorities, such as the introduction of minimum benefit standards or providing expanded mental health benefits.
  3. Governance: Employers want a more centralized view on employee benefit programs. Having a variety of different programs in different locations can leave employers with fractured and inconsistent data. A captive is a way to enhance control over the available data.

These drivers are all interrelated and complement each other. Having more and better data can help companies identify areas where they can offer more flexibility, and can provide cost savings, which in turn allow for more flexibility and better governance.

Historically, captives have been a property and casualty solution in the purview of risk managers, who were siloed far away from employee benefits. But that is slowly changing as HR leaders become more involved in overall company strategy. Many benefit leaders are thus learning about the concept of a captive for the first time. The pace of that learning is accelerating, leading to a shift in the demand for captives.

“Until recently, there hasn’t been a critical mass of companies utilizing a captive,” says Sven Roelandt, Global Head of Employee Benefits Financing at Aon. “Now everyone has several peers that are doing it, so there is more curiosity around the topic.”

9.8%

The global medical trend rate is expected to be 9.8% in 2026. While down slightly from 10% in 2025, it is historically still very high.

Source: Aon’s Global Medical Trend Rates Report 2026

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Comparing Different Employee Benefits Captive Solutions

There are a few different types of captives that employees can use, depending on their size, goals and appetite for risk:

  • Single parent captives are licensed insurance companies owned by the parent company that insures the risk of the company. While they involve an investment on the part of the parent to establish and operate the flexibility, data availability and control can allow companies to recognize lower benefit costs over time. Additionally, employers can integrate their employee benefits into a captive originally created for a different purpose, such as adding to an existing property and casualty captive. This can be an option for companies with an existing captive who recognize that it can be useful as a cost control measure rather an as a profit center.
  • Cell captives are a more recent innovation, with lower operating costs and faster implementation through leveraging an existing captive-platform. Employers benefit from an existing structure with market relationships already in place. They allow employers the option to start with a few employee benefit lines and then scale over time. A cell captive offers the security of an independent captive while benefiting from the sharing of administrative functions across the wider entity.
  • Group captives are not a realistic solution for employee benefits but exist in other contexts.

Deciding What’s Right for the Organization

The first step toward setting up a captive is conducting a feasibility study. This includes:

  1. Determining what the employer’s goals are and their risk tolerance
  2. Examining plan design, insurer networks and governance structures
  3. Gathering and analyzing claims and premium data, looking at loss ratios, volatility and large claim patterns
  4. Recommending which type of captive structure and governance makes sense

The feasibility study may also determine that a captive isn’t the right solution. There are reasons an employee benefits captive program can be more challenging. For example, employers looking to set up an employee benefits captive may find the scope of relationships and partnerships difficult to coordinate into a single integrated program, meaning making a clean transition could be difficult. Some employers mitigate this by starting smaller with a handful of programs and adding additional ones as they come up for renewal.

There are also regulatory hurdles to consider. For example, in the U.S., employers would need to secure approval from the Department of Labor on any new captive arrangement that includes medical coverage, which can be an expensive and difficult proposition. Some companies are overcoming this challenge by starting with their U.S. health benefits outside the captive, dealing with rising costs via medical stop-loss coverage, and then eventually folding health benefits into the captive once the program matures.

The most common barriers employers cited in Aon’s 2025 Global Benefits Trends Study were a lack of an existing captive arrangement, the lack of a clear business case and costs (both setup costs and ongoing costs). Cell captives may alleviate some of the most common barriers because they have significantly lower setup and ongoing operational costs, a lower governance burden for the company and a clearer exit strategy.

Lastly, it should be noted that captives are not a quick fix. Much of the benefit comes from being able to analyze claims data, and it takes some time to accumulate enough data to gain real insight. “Six months of data won’t tell you what you need to know about medical trend,” says Aon’s Roelandt.

31%

of respondents in Aon’s 2025 Global Benefits Trends Study are considering a captive, up from 26% in 2024.

Source: Aon’s 2025 Global Benefits Trends Study

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Case Study – Royal Philips

Case Study – Royal Philips

The First Company to Run a Full Employee Benefits Program Through a Cell Captive

Since 2009, Royal Philips has operated a global underwriting model for employee benefits, including centralized placement pricing to gain efficiency across markets. But this global underwriting model couldn’t be sustained with changing markets. And at the same time, the pandemic was a reminder of the need for resilience and responsible benefit structures. Royal Philips chose a captive model to retain central governance, and gain flexibility, data access and long-term sustainability. The program will add value in several ways, including flexibility in benefit design to remove exclusions, enhanced employee experience, and the integration of wellness and prevention programs. The company forecasts savings of 8% a year by moving into a captive.

Quote icon

We see benefits not just as a cost center but a strategic lever to support wellbeing, engagement and resilience. That’s why we’re producing new models like global underwriting and now the cell captive.

Martin Delsman
Benefits Leader at Royal Philips

Additional Benefits of a Captive

Many employers focus on the cost savings aspect of captives, but a captive can do more than just provide data and control costs. It can also function as a vehicle to implement broader company strategies around global benefits. That’s especially true when it comes to the goal of implementing global minimum standards. Aon research finds multinational companies were twice as likely to be focused on global minimum standards if they had an employee benefits captive.1 That may be because when companies use captives to purchase insurance, they centralize buying. This allows them to focus more clearly on minimum standards, while using fewer fronting networks, providing potentially improved offerings in some jurisdictions.

Solutions that Make Sense

Creating an employee benefits captive can be a labor-intensive process that demands a long-term vision with probable governance challenges. But for companies who want to gain greater control over their global benefits through flexibility, cost savings and better governance, it can be a powerful tool.

Contact Aon for more information on how a captive feasibility study can be the first step toward long-term savings.

2x

Implementing global minimum standards can make captives more attractive, as evidenced by the fact that employers with captives are twice as likely to have global minimum standards.

Source: Aon’s 2025 Global Benefits Trends Study

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Aon’s Thought Leaders
  • Ciaran Healy
    Global Head of Captives, Commercial Risk Solutions
  • Ciaran McCabe
    Strategy and Delivery Leader, Aon’s White Rock Group
  • Sven Roelandt
    Global Head of Employee Benefit Financing

1 Aon’s 2025 Global Benefits Trends Study

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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