The advantages of setting up a multi-national pooling arrangement is the following:

1. The entire local national insurance group is eligible for experience rating.
2. Countries with small numbers of local nationals can still participate.
3. Possible dividend check back to the parent company after final year end accounting.
4. More control by the parent company vs. each country doing their own thing. Coordination through the multinational pooling company
5. Cost savings and efficiencies
6. Single point of contact for many issues

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 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:

• Nothing changes to the local insurance contracts included in the pool. Local coverage is provided by the local partner.
• The pooling contract is between the parent company and the network (for most networks this is the partner operating in the country of the parent company).
• There is no extra charge for the company (parent or local).
• A pool is an accounting agreement not an insurance contract.

WHICH COMPANIES CAN POOL?

In order to establish a multinational pool, a company must operate in at least 2 countries and have group coverage for a certain minimum of employees worldwide. Pooling networks may have different eligibility conditions. The benefits must be placed with insurers that operate in the same multinational pooling network for a pool to be established.

TO POOL OR NOT TO POOL?

Generally only risk benefits are pooled or the risk elements of pension contracts e.g. spouse’s death in service cover. The most common are group life and long-term disability. Some networks will pool other contracts such as private medical insurance, critical illness, accidental death and disability on a case-by-case basis. It is important to analyze the past claims experience of a contract to determine whether or not it should be included in the pool. Other factors include:

1. The pool should be balanced if possible, with similar numbers of employees from the various countries. This gives an even distribution and avoids conflict where one operation is seen to be heavily supplementing the cost of employee benefits elsewhere in the company.
2. Local profit sharing may produce a higher dividend for a subsidiary.
3. A subsidiary should be excluded if there is poor claims experience in a particular territory as this may only create a negative balance (each territory should be analyzed individually to assess the impact on the pool).

ADVANTAGES FOR MULTINATIONAL COMPANIES

- No extra risk is taken.

- Cost savings on employee benefits and administration.

- One stop shopping for employee benefits.

- Administration of employee benefits is centralized Control.

- Easy transfer of employees from one location to another.

- Higher non medical levels and better underwriting can be obtained.

- International strength gives greater economies of scale.

OTHER SERVICES AVAILABLE FROM NETWORKS

Multinational pooling networks assist multinational companies in the management of their human capital. They also assist brokers and consultants to meet the needs of their clients through a range of services:

• International quotations.
• Standardized reporting on pooled and non pooled contracts.
• Information on

o Social security systems

o Typical benefits

o Network partners and their products

• Employee benefit questionnaires.
• Expatriate cover and offshore funding.
• Any specific assistance.

It should be noted that not all of the networks provide these services. Further details are available on request.