Key facts
What is multinational pooling?
An arrangement whereby multinational organisations can benefit from favourable insured claims experience on a worldwide basis. It is essentially a second-stage accounting of insured employee benefits plans at an international level.
Where to get more information?
International Employee Benefits Association
Which are the main networks?
Allianz All Net, Generali Employee Benefits Network, International Group Program (IGP), ING Global Network, Insurope, Maxis Global Benefits Network, Swiss Life Network, Zurich Employee Benefit Network
Multinational pooling arrangements for group risk benefits can yield significant savings for employers operating across several countries, says Jennifer Paterson
Multinational pooling is a global approach to insuring benefit liabilities and achieving savings, while still enabling employers to meet individual legal and practical requirements for insurance coverage in each country.†
Theo Lutgendorff, head of Zurich Employee Benefits Network (ZEBN), says: “Within one country, an employer can establish benefit plans whereby all staff at its various branches and subsidiaries can be covered by a contract with one insurer. Approaching the insurance market with the combined membership of all plans in one country often enables a better premium rate to be achieved than if each of the plans was insured on a standalone basis.”
First introduced in the 1950s when US multinationals started to expand into Europe, pooling arrangements are gaining popularity.
Roland de Crombrugghe, general manager at ING Global Network, says: “Those multinationals asked their US insurer if they could insure employees abroad, but at that time they could not. In most countries, if employers want tax-deductible premiums, they need to use the local licensed insurer. US insurers made agreements with local insurers and started networks, setting rules on how to consolidate contracts.”
A pool brings together insured group risk benefits such as life insurance, income protection, short- and long-term disability and accident policies. It could also include pensions or private medical insurance. In most cases, a benefits provider will partner with a pooling network. Paul Avis, sales and marketing director at Canada Life, says: “We are only interested in group risk, but our pooling partners offer private medical insurance, and will do some pensions work for multinationals. Each country will have a different range of insurance services.”
Three common types of pool
To consider multinational pooling, an organisation must operate in two or more countries and employ at least 100 staff. It would typically adopt one of three common types of pool, each offering a different level of protection. A loss carry-forward pool may have surpluses in claim-free years as high as 85% of premiums paid, with any losses carried forward to the next reporting period.
Stop-loss pools offer the protection of any losses being absorbed by the network partners at the end of each reporting period.
In claim-free years, the typical dividend could be about 70% of premiums paid. Multiple employer pools are suitable for multinational organisations with a smaller number of staff, for which greater volatility in claims is likely.
Typical dividends in a claim-free year can be 25% of premiums paid. The suitability of a pool often depends on a firm’s size and attitude toward risk.
Colin Vening, a senior consultant in Mercer’s international health and benefits team, says: “To get the best return from pooling, employers want the maximum number of contracts and countries. Spreading the risk increases their chances of a dividend. The idea is to negotiate lower front-end costs in each country. But the bigger traction there
is, if their claims are low, a dividend should be payable at the end of a calendar year.”
Each year, the insurance networks put together a profit-and-loss account for providers, which then give an employer details of all its policies in each country.
Vening says: “If an organisation is looking for more control on its employee benefits spend on a global basis, multinational pooling will help it achieve that.”
Avis adds: “There are no explicit costs involved within a pool. If the pool makes a profit, an employer gets a dividend, and it gets an effective profit share back on the money it has paid in. There is no real downside to going into an arrangement.”
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