A simple list of advantages
- Risk spreading
- International dividends
- Risk retention
- Pooled coverages
- Simplified profit and loss accounting
- Modular solution (choice of amount of risk retained, losses carried forward,etc.)
- Simplified participation
- Coordinated benefits for local subsidiaries
- Select insurance companies as partners
Imagine the following scenario – your financial director walks in with half a million euro’s and asks you to throw them away. Would you do this? No, of course not. But when a company is not taking advantage of multinational pooling, this could be happening. Example Profits MP. Boost your profits and financial gains with Multinational Pooling.
Historically, many multinational companies established pooling arrangements purely on the basis of existing group insurance contracts. These are contracts that have been insured by two or more associate insurance companies belonging to one or, in many cases, several pooling networks
In more recent times, the era of mergers and acquisitions has resulted in companies inheriting pooling arrangements, giving rise to multiple (four or more) pools. While these phenomena are not negative, and are generally preferable to having no pooling arrangements, they represent a default position that could be improved by active participation and management. We can help you to coordinate this process.
Please call us if you want an offer to start a Orientation phase. At the end of this Orientation phase you will receive a report on which you can decide if you want to start a more extensive Research phase.
The market-leading track record of Multipool (Insurope) profits is impressive over the long term. See for yourself.
Multipool is a multi-employer pooling arrangement protected by a stop loss system, in which losses in the overall multinational account in any year are automatically cancelled by the network of the insurer. A risk charge is applied. Due to the large number of companies participating in small groups pool this charge is relatively low. On the other hand, within a pool, deficit results from “other” companies are first offset before arriving at an overall surplus result.
Insurope: Average dividends payable from Multipool, since its launch in 1984, run at a 44% average payout of own positive results, over the lifetime of this pooling product. Over good years this can represent as much as a 17% reduction in risk premiums.
This is a healthy reduction in costs and increasing profits for any multinational group, however big or small. Since its inception Multipool has paid dividends in all years except 1984 and 1993. (Source Insurope)
Multinational pooling networks offer three types of pools. There are within these pools different levels of protection. Mostly determined according to their size and attitude towards risk. The types of pool are:
Loss carry forward
For large multinational organisations, a loss carry forward basis may be the most attractive as the surpluses in claim-free years can be as high as 85% of premiums paid. Any losses, however, are carried forward to the next reporting period to be deducted from any potential surplus, making this a higher-risk, higher-reward option than other types of pool. As such, this type of pool may not necessarily be suited to multinational organisations who are risk-averse.
The loss carry forward basis may therefore suit very large multinational organisations employing several thousand individuals, who would expect to have a reasonably stable claims rate, as it offers them a solution close to self insurance whilst protecting them against high value claims.
Stop loss pools
Stop loss pools offer the protection of any losses being absorbed by the network partners at the end of each reporting period. Consequently, they offer greatest benefit to multinational organisations that are more likely to experience greater volatility in claims or are more risk averse.
In claim-free years the typical dividend could be around 70% of premiums paid, reflecting the higher risk charges levied by the network partners for this increased level of protection.
Multiple employer pools
The multiple employer pool is suitable for multinational organisations with a smaller number of employees, for which greater volatility in claims is likely.
Typical dividends in a claim-free year can be 25% of premiums paid. Any surplus or loss depends upon the aggregate result for all the multinational organisations participating in the pool, and it offers the protection of operating on a stop loss basis – losses being absorbed by the network partner at the end of the reporting period.
The pension pooling vehicle then invests in assets, such as global equities, bonds and cash, on behalf of the investing pension funds.
One of the main advantages of pooling is that instead of having a number of pension funds in various locations having different investment managers, administrators and custodians, a more streamlined approach is adopted so that the assets are managed centrally in the pooling vehicle.
As a result, pooling offers considerable economies of scale, particularly for smaller pension funds, and this in turn leads to cost savings and enhanced returns. It also provides greater consistency in asset management and enhances control over investment risks.
In some cases, the pooled fund can employ the services of asset managers who would not otherwise accept their business.
Companies operating in more than one country encounter a broad range of obstacles. Among them are the tracking and payment of benefits across multiple locations and how to best work with insurers abroad who operate under different laws and financial systems. Multinational pooling helps employers reduce risk and control costs while optimizing the delivery of benefits to an international workforce.
The advantages of setting up a multi-national pooling arrangement is the following:
- The entire local national insurance group is eligible for experience rating.
- Countries with small numbers of local nationals can still participate.
- Possible dividend check back to the parent company after final year end accounting.
- More control by the parent company vs. each country doing their own thing. Coordination through the multinational pooling company
- Cost savings and efficiencies
- Single point of contact for many issues
This moment the financial crisis continues with no clear time frame. There is not only a meltdown which results in evaporation of fund values and distraction of employees. There is also a eroding confidence in spending ability.
These problems can partly be solved with pooling of certain risk and employee benefits. Every company has to act swiftly to decrease their annual spending.
Planning your human resources is more than ever the way to move ahead with the right people on the right positions. No salary increase will not create highly motivated employee. A disengaged workforce will not contribute effective to the business (and profits).
To manage the costs of personnel, you can try to start with flexible Employee Benefits. The aim is also to improve effective management.
Companies struggling to survive will aim to improve the cost basis from a tax and benefit perspective.
You can take a local approach or a global approach. The global option will reduce the local cost. The revenues can be astonishing. Cost reductions up to 40% can even be realised by small groups pooling (Multi-pooling). These advantages can be created even by groups less than 100 employees.
Please call or email us if you need further information.
The ING-MAPS pool allows smaller multinational companies to share in the benefits from a pool. The claims experiences of a number of smaller companies are combined into one larger pool, spreading risk and providing economies of scale. In order to qualify, a company must have a group contract based on a minimum of 50 employees in more than one country.
Although a company is eligible for a stand-alone pooling agreement at 300 lives, a client can still opt for the Aggregate Pooling System if the number of employees in the pool lies between 300 and 1000. This gives a multinational the opportunity to benefit from the additional protection of the Aggregate Pooling System against adverse experience.
Settlement of Dividend:
- Aggregate Share: the part of the positive balance used to compensate the negative pooling balances of other companies, including the stop loss premium
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Historically, many multinational companies have left the design and financing decisions related to benefit programs to their local subsidiaries , with minimal oversight or control from headquarters. This includes the selection of brokers and other consultants that provide advice on these programs locally. This decentralized approach has a number of implications:
- In the absence of strategic direction from headquarters, benefit designs may or may not be consistent with the overall global benefits strategy.
- Depending on the level of local negotiating power (and the role of intermediaries), total premiums paid in local markets may not be as competitive as they could be.
- Savings from multinational pooling may be suboptimal due to a lack of proactive management and coordination of the pooling strategy.
- There is little potential for leverage on broker and consulting fees globally.
- There may be situations in which duplicate or overlapping benefits exist.
- It is difficult to apply consistent governance practices and processes.
- Basic information on the risk benefit programs around the world (such as plan designs, insurers and premiums) may not flow up to headquarters effectively.
Why compare benefits and premiums?
Multinational pooling brings the risks from a network of local insurance providers together to achieve savings and underwriting benefits based on the risk as a whole. But each network has a single specified local insurer in each individual country.
This means that whilst one network may provide the best possible coverage in some of your territories, a different network might better serve other areas. We will help you to compare benefits and premiums across all of the available networks to establish:
Managing risk through a captive (see below) offers a number of benefits for employers. Specifically with respect to employee benefits, through the use of a captive arrangement, employers can gain greater control over claim reserves and investment income.
Additional key employer advantages may include:
■ Consolidation of global risk. Risk Managers are increasingly taking a
holistic view in consolidating employers’ global risks. By uniting all global
benefits through captive reinsurance, multinational pooling—or both—
global risk volatility may be smoothed and better budgeted.
■ Customized programs. Captive ownership may help employers tailor
their insurance programs to reflect their specific business needs and
■ Management of surplus. To the extent insured risks contain high margins relative to the employer’s population, captive financing may help employers control those surpluses. By combining all insurance benefit plan assets, the employer retains the investment income.
■ Tax advantages. A captive qualifies to take full advantage of tax deductions if it has sufficient risk transferring and sufficient unrelated risk. Employee benefits qualify as “unrelated business,” thereby creating a possible tax advantage for the employer.
Multinational pooling allows multinational companies to benefit from favourable insured claims experience on a world-wide basis.
Around the world there exist various methods of financing employee benefits. Many multinational companies choose insurance as a method of financing employee benefit plans. A multinational pooling account is essentially a second stage accounting of insured employee benefit plans at the international level. Such a process introduces the application of administration and risk charge retentions which are based on an accurate assessment of costs incurred in insuring a given group of employee benefit risks internationally. This approach means that ingoing premium levels, even if set by tariff, do not necessarily represent the cost of a given plan. In many cases the real or net cost will be much less, depending on the level of insured claims experience.
A multinational pool brings together insured benefit plans (retirement, death, disability, medical, accident) which have been set up locally for two or more countries. Premiums are paid by subsidiaries on a purely local basis, and claims settled by local insurers on a purely local basis. At the end of each experience year the local insurers involved in a given multinational pooling account will submit the results of the local plans to showing amounts held, received and paid in respect of those plans.
A multinational account is then drawn up showing premiums paid minus claims, minus the insurer’s risk retention and administration charge. This account also takes into consideration other items such as reserves, interest, non-rated premiums, local taxes, local dividends and commissions.
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Multinational pooling allows multinational companies to benefit and profit from favourable insured claims experience on a global basis. It is essentially a second stage accounting of insured employee benefit plans on an international level. International profit sharing allows multinational companies to obtain experience rating over the borders of the countries or territories in which they operate.Multinational pools are made available by networks of insurance companies cooperating together to provide cover for mutual clients. Some networks are wholly owned by global insurers and others are a partnership of top rated companies working together under an agreement of cooperation.
The purpose of a pool is to offer a facility for potential returns on the premiums paid to insurers.
This return of premiums is called the dividend. Premiums paid to the insurers are combined in the pool. A dividend will be payable if the income, in the form of premiums, is greater than the outgo that is composed of claims, expenses and commissions.
Dividend = Income (Premiums) Outgo (Claims, Expenses & Commissions)
Claims experience is the single most influential factor on the result of the pool and the likelihood of a dividend. A dividend is only payable if income is greater than outgo. If income is less than outgo the negative balance can either be carried forward, reduced or waived depending on the pooling contract selected. Other factors such as local profit sharing and taxes can also affect the potential dividend.
Some important remarks to note:
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De meeste multinationals zetten een pooling op met als doel kostenvoordelen te behalen. Na ons laatste artikel over pooling lijkt het verstandig nog even wat dieper in te gaan op de voor- en nadelen van Multinational Pooling.
Hoe werkt Multinational Pooling praktisch?
Een multinational sluit een overeenkomst met een Multinational Pooling partners. Daar zijn er een aantal van: IGP, Insurope, Fortis, Generali en SwissLife. De lokale contracten (dus de contracten die afgesloten zijn in het land van de vestiging van de multinational) worden gepooled in één overeenkomst. Dat zorgt voor een grotere efficiëntie maar bovenal vaak voor een poolingswinst. Ze noemen dat ook wel internationale winst. Financieel vaak uiterst aantrekkelijk maar het kan ook tegenzitten als er veel schadegevallen zijn of extra reserveringen moeten worden verricht.
Hoe is een premie meestal opgebouwd in een gewoon contract?
3. Lokale dividend
4. Kosten & risicopremie
5. Schade reserve en
Voor een belangrijk gedeelte kan een multinational winst behalen doordat de winst van de “lokale” verzekeraar terecht komt in de pool. De aansporing van de Multinational richting de vestigingen om zorgvuldig met schade om te gaan, is een plezier kostendrukkend neveneffect.
Het wordt voor grotere bedrijven steeds belangrijker scherp te calculeren. De kosten stijgen en door de concurrentie staan marge steeds vaker onder druk. Genoeglijk achteroverleunen, ook voor groot-MKB of multinational is verleden tijd.
Het verhogen van de omzet en de bijbehorende rendementen kan niet zonder een kritische kijk op uitgaven binnen elk bedrijf.
Maar ook andere vaste kosten kunnen vaak sterk beperkt worden. Dat is veel efficiënter dan de omzet of opbrengst verhogen. Met bestaande of alternatieve dienstverleners kan onderhandeld worden over de laagste prijs. Dat kan vaak zonder ook maar iets af te doen aan of compromissen te sluiten over de bestaande kwaliteit van het product of het serviceniveau dat men ontvangt.
Denk daarbij maar eens aan telecommunicatie, wagenparken, leasecontracten, koeriersdiensten, zakenreizen, schoonmaakdiensten, kantoorbenodigdheden en schadeverzekeringen. Afhankelijk van de categorie zijn gemiddelde besparingen van 20% al snel te realiseren.
Sommige bedrijven doen dat zelfs op no cure no pay basis zoals Expense Reduction Analysts. De fee bedraagt veelal een percentage van de besparing de eerste anderhalf jaar.
En wilt u een lagere premie voor uw huidige bedrijfsassurantiepakket, bel ons dan even.
Multinational Employee Benefit Pooling is verzekeringsconstructie om flink te besparen op de kosten van employee benefitsregeling (EB). Er is dan een goede kans dat er grote financiële voordelen te bereiken zijn met pooling van deze EB-kosten.
Vooral voor grotere concerns is deze vorm van internationaal verzekeren populair. Maar ook voor het kleinere MKB met buitenlandvestiging(en) zijn forse verlagingen van de collectieve premies te incasseren.
Multinational Pooling is in feite een vorm van internationale winstdeling, waarbij zoveel mogelijk collectief verzekerde overlijdens- en arbeidsongeschikheidsrisico’s van een multinational worden samengevoegd om de multinational en al haar deelnemende dochterondernemingen optimaal voordeel te laten behalen uit haar totale groepsvolume.
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