Insurance funding models and risk management

I am happy to co-author this article with Beatrice WEDER DI MAURO, President of the CEPR - Centre for Economic Policy Research, reflecting on the urgent need to engage in collective thinking and action to adapt our response to the challenge of insurability in the face of escalating climate risks. This article, which captures key convictions from our joint workshop hosted at Collège de France by the AXA Research Fund and CEPR - Centre for Economic Policy Research, couldn't have been more timely.   Devastating floods in Valencia, the wildfires in Los Angeles, the typhoons in Mayotte and La Réunion... These recent climate catastrophes show a clear reality: climate risks are intensifying and the protection gap for local communities and economies are becoming evident. Global economic losses from extreme weather events reached $320 billion in 2024, while in Europe, only 25% of economic losses were insured - leaving individuals, businesses, and communities vulnerable.    To address this, we need to enhance risk-sharing mechanisms and promote partnerships between public institutions and private companies.   Ensuring insurance accessibility and effectiveness is crucial. This can be done through: ➡️ Hybrid models, combining market mechanisms with public-private partnerships, to help ensure broad coverage and affordability. France’s CatNat regime and Switzerland’s hybrid model offer valuable insights. These models can be adapted to regions facing extreme exposure, such as sea level risks. ➡️ Greater investment in prevention and risk-sharing mechanisms. Initiatives like local municipal risk assessments can help small municipalities assess and mitigate local climate risks. ➡️ Impact underwriting, where insurers incentivize policyholders to adopt risk-reducing measures in exchange for lower premiums. ➡️ Public education on climate risks and stronger coordination between insurers, governments, and consumers to ensure preventive measures are taken seriously.   As we move forward, it's clear that policymakers, insurers, and society must work together to strike a sustainable balance between affordability and fiscal viability. This is not just about who pays the bill. It is about how we manage risk in an increasingly uncertain climate landscape. Let's continue to foster collaboration and innovation to close the protection gap and build a resilient future. 👇 https://lnkd.in/er6BkrtZ

150-employee construction firm. $2.1M health spend. 14% renewal increase staring them down. Their CFO asked one question that changed everything: "Where's our claims data?" Broker said they couldn't access it. Fully insured plan. Carrier owned the information. Here's what happened when they switched to level-funded: Month 1: Full claims transparency. Discovered $47K in ER visits—80% were after-hours primary care issues. Month 3: Added $0 telehealth. ER claims dropped 20%. Saved $9,400/month. Month 6: Stop-loss at $25K attachment point (not the $50K broker originally quoted). Protected on a $380K cancer claim—paid only $25K. Month 12: $127K surplus refund. Total savings: $247K vs. renewal quote. The math: 38% of small employers moved to level-funded by 2023. Average savings: 17%. Average refund: $8,400 for the 37% who get one. This wasn't luck. Claims data revealed the real problem. Level-funding gave them control. Transparent stop-loss protected them from catastrophic risk. You're not stuck with double-digit increases. You're stuck with a funding model that hides your own data from you.

With healthcare premiums continuing to outpace wage growth, the stability of traditional fully-insured plans is coming into question for many mid-market employers. As a recent Capstone DC report notes, these "cracks" in the employer insurance market are understandably causing financial leaders to explore alternative funding strategies. Self-funding often emerges as a compelling option, promising more control over plan design and the potential for significant long-term savings. However, this path involves a fundamental shift in risk management. Moving from a predictable, fixed premium to a self-funded model means the employer assumes direct financial responsibility for employee health claims. This transition is a major strategic decision, not just a change in vendors. It requires a deep analysis of a company’s cash flow, employee demographics, and risk tolerance. Key components, such as the right stop-loss insurance to protect against catastrophic claims and access to robust data analytics, are essential for success. Making this move based on a price quote alone can lead to unforeseen financial exposure. A successful transition to self-funding is built on a comprehensive strategy developed with an experienced partner who can model potential outcomes and structure a plan that aligns with the company’s specific financial goals.

Rethink Rising Premiums: A Smarter Strategy for Your Benefits Renewal As renewal season approaches, many business owners and financial leaders are bracing for yet another year of rising health insurance premiums. But sticking with the status quo could mean missing out on substantial savings and smarter risk management. Now is the time to explore innovative funding models—like self-insured captives—that put you back in control. Captives are no longer just for large corporations. Small and mid-sized businesses are increasingly turning to this model to: • Reduce costs by beating the average PEPY (Per Employee Per Year) spend • Gain transparency into claims and plan performance • Customize benefits to better serve employees and dependents • Mitigate risk while maintaining flexibility If you're tired of unpredictable renewals and limited options, it's time to move beyond the comfort zone. Forward-thinking companies are already making the shift—don’t get left behind. Whether you have 50 employees or 500, let’s talk and start the conversation now. Explore how a captive strategy could transform your benefits plan and unlock meaningful savings for your organization. #renewalrates #healtcarecosts #riskmitigation #creativebenefitsolutions