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Early Signs that 2015 will be a Boom Year for Benefits Administration

Barely two months into the year and there has been lots of activity across the benefits administration market, including new contracts, contract expansions, and M&A activity. 

Contracts have come out of the U.S. and Europe, including the U.K. and the Netherlands. U.S. activity has come from both the private and public sectors, with deals ranging from as few as 800 employees to more than 100k. Significant deals include Towers Watson’s private health insurance exchange contract with Time Inc. Back in 2013, Time transitioned its U.S.-based retirees to an exchange and is now following this up by moving its active employees to a private exchange. The private exchange market is the fastest growing H&W service line through 2018, with benefits extending to both employers and employees.

An upside surprise this year is the emergence of Total Retirement Outsourcing (TRO) activity in both the U.S. and U.K., given that, for the last few years, overall TRO activity has been quite low. The shape of TRO deals has also changed and now tends to present as contract expansions including other pensions / retirement administration services. 

Perhaps the most interesting trend to date is the expansion into other country markets. The majority of benefits administration service providers are focused on a single market, but there are quite a few who have established themselves in several countries. For the last few years, expanding into other countries has been a low or non-existent priority for most vendors, but a few did establish multi-country benefits offerings, taking one of the two forms:

  • Multi-country benefits brokerage and consulting services
  • Multi-country technology platform with optional local administration.

In H2 2014, Towers Watson joined the list of vendors with a multi-country offering, and launched a global benefits brokerage offering similar to those of vendors such as Aon Hewitt and Mercer. And Towers Watson has wasted no time in expanding its offering to new countries in January 2015, including launching an offering in South Korea, and acquiring Metis Insurance in India. Both of these countries further expand Towers Watson’s capabilities in Asia Pacific. Up to now in these global brokerage and consulting deals, benefits administration services have rarely been added.

Another early 2015 market expansion has seen U.K.-based JLT acquire Liberty Asset Management to expand its employee benefits business in Ireland.

With the first two months of 2015 looking this good, the signs are that the remaining 10 months will yield substantial contract volumes and enhanced and expanded benefits administration offerings.

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