3 types of pools
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.
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