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 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

• 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.

Here is the solution.

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:

• Annually
• Aggregate Share: the part of the positive balance used to compensate the negative pooling balances of other companies, including the stop loss premium

The Results

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:

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.

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
changing circumstances.
■ 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.

An explanation….

Captive—an insurance company that is a wholly owned and operated subsidiary of a parent corporation whose primary business is not insurance.

Captive reinsurance—coverage provided by a licensed insurance company that is reinsured to a captive insurance company.

Multinational pooling—a cross application of experience and expenses for consolidated accounting across different insurance carriers for employees of the same firm in different countries.

• 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

What are you waiting for? Just call us now. +31206200825. Ask for Gerrit-Jan Doorneweerd, Henk-JanLeppink or René Graafsma.

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)

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.

If the experience of the insured group is favourable, then there will be a surplus in the multinational account, payable to the client as a multinational dividend. Estimates by advisors on multinational pooling suggest that over a period of years an 8% to 15% reduction of local premium costs can be achieved. In years of good experience, dividend percentages can be substantial, even reaching 80% to 90% of risk premiums paid. (bron Insurope)

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.

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?

1. Schade
2. Commissies
3. Lokale dividend
4. Kosten & risicopremie
5. Schade reserve en
6. Winst
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.

Nadelen zijn er zeker ook. Volgende week komen we daar even op terug. 

Het verhogen van de omzet en de bijbehorende rendementen kan niet zonder een kritische kijk op uitgaven binnen elk bedrijf.

Afgelopen week hebben we hier en hier de voordelen laten zien van het samenvoegen van verzekeringskosten met behulp van Multinational Pooling

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.

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.

Waarom pooling?

1. Wereldwijd beheer van lokale employee benefits regelingen voor alle werknemers van een multinational.
2. Wereldwijd beheer van kosten van al deze regelingen.
3. Jaarlijkse financiële rapportage van alle gepoolde verzekeringen.
4. Jaarlijks uitbetaling van de poolingwinst.

Vooral de poolingwinst levert al snel een forse verlaging van de collectieve premie op waar elk hoofdkantoor met genoegen kennis van neemt.