Need to know:
- Annual dividends are still important, averaging 5% to 8%, but data is now regarded as the most valuable benefit of a multinational pool.
- Multinational pooling enables an organisation to take advantage of its global scale, accessing better terms and conditions and more sustainable pricing at a local level.
- Exploring the differences between networks, especially in terms of local insurer partners and the services they can offer, is key to a long-term relationship.
Multinational pooling enables employers to bring together local insured benefits in one pool. And, with it delivering significant advantages, it is an approach that any organisation with an international footprint should consider.
The approach, which was introduced in the 1950s, is still going strong, says Marco Giacomelli, a committee member of the International Employee Benefits Association (IEBA) and chief executive officer of IGP Employee Benefits Network: “It’s a very viable and popular way to optimise the funding of employee benefits.
“It’s used for [group] risk benefits such as life, accident and disability and is especially popular among medium-to-large multinational [organisations]. We also see some global organisations maintaining a pool alongside a captive.”
Popularity boom
The last few years have seen particularly strong growth in the market, with one multinational pooling network, Insurope, reporting growth of 30% since the Covid-19 pandemic. Morten Unneberg, chief executive officer at Insurope, says the pandemic triggered a change in thinking. “It made multinationals more aware of risk,” he explains. “When the pandemic started, there was a lot of confusion about what benefits an organisation’s employees could access in different countries. A multinational pooling network makes gaining this oversight much easier.”
As well as giving them more information and control around the benefits they offer, multinational pools have low barriers to entry. Adrian Gadney, global benefits financing senior consultant at Mercer, says: “An organisation only needs to have employees in at least a couple of countries to set up a pool. There’s no payment to the network and some don’t even have a minimum premium. I’ve seen cases where an [employer] sets up a pool with nothing in it so it’s there as it expands globally.”
Pooling benefits
When multinational pooling was first launched the annual dividend, where the network returns any excess premium to the organisation, was the key benefit. Michael Drake, senior benefits financing consultant and pooling lead at Willis Towers Watson (WTW), says: “It’s still a benefit, but, as pricing has become more sophisticated, dividends have often become smaller and less of an incentive.”
For instance, where organisations could expect average dividends of around 12 to 15% a decade ago, these have now shrunk to between 5% and 8%, says Paolo Marchiori, global client leader at Generali Employee Benefits Network.
Global vision
While dividends may have slipped down the charts, they have been replaced by data. “Organisations value the data they can get from a network,” explains Marchiori. “There’s much greater transparency around how benefits are performing with networks providing organisations with regular reports and dashboards. This allows better governance.”
This insight also enables greater risk mitigation. As an example, Giacomelli points to an employer that saw a higher level of claims for respiratory diseases among employees in one country. Further investigation found the air quality was poor in the factory and the employer installed new filters to prevent further issues.
Using a network also enables an organisation to benefit from its global scale. “It can access improved terms and conditions on cover; better, more sustainable pricing; and will also have the benefit of an escalation point if there are any services issues on a local level,” Drake adds.
The network can also support an organisation’s benefit ambitions, working with it to develop solutions that meet requirements around environmental, social, and governance (ESG), diversity, equity and inclusion (DEI) and wellbeing objectives. “We’ll coordinate with local partners to help organisations get the solutions they need, such as a wellbeing programme that addresses claims trends,” explains Unneberg.
Find the right network
Although there are only seven networks, the process of finding the right one is a bit like solving a jigsaw puzzle. Gadney says he starts by looking at the organisation’s geographical footprint. “We might look at which network can write the most or focus on cover for the organisation’s key markets,” he explains. “We’ll then look at details such as the quality of the local insurers and the additional services and support the network can bring.”
This research is essential as relationships tend to be for the long-term. Although employee benefits consultants do remarket and benchmark the networks to ensure they are competitive, it is common for an organisation to stick with a network provider for many years.
