Introduction to Multinational Pooling of Employee Benefits
Introduction to
Multinational Pooling of
Employee Benefits
What is multinational pooling?
A centralized profit & loss account
+ Combining in multiple countries
+ the financial results
+ of a multinational’s
+ local employee benefit plans
+ into a pool of contracts
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Multinational
Company
Subsidiary
Austria
Subsidiary
Japan
Subsidiary
Mexico
Subsidiary
UK
International
Employee
Benefits Network
Insurer
Austria
Insurer
Japan
Insurer
Mexico
Insurer
UK
Claims
Int’l agreement
Premium
Int’l dividend
Premium
Premium
Premium
Claims
Claims
Claims
Conditions for pooling
MNC has pool agreement with a network
At least 2 subsidiaries have group plans with a partner of this network
Group plans qualify for pooling*
What type of Employee Benefitsqualify for pooling?
* Group insurance contract (mainly) paid by the employer
+ Life & survivors’ benefits
+ Accident cover
+ Disability and sickness
+ Medical care
+ Retirement benefits (only if risk-related)
* Expected to bring Profitability to the Pool
+ As agreed between network & local partner
+ Claims history favorable
+ Local price & conditions favorable
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International Dividend
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PREMIUMClaims
Local Profit Sharing
Commission & Tax
Income & Expenses
Local Insurer
without pooling
Claims
Local Profit Sharing
Commission & Tax
I&E Network
InternationalContribution
with pooling
Local terms & conditions continue to apply with pooling
Margins are used to:- cover other losses in pool- pay out International Dividend
Includes profit and margin for local insurer
Margins if costs < premium
Lower risk charges because of risk spreading
Pooling in Practice
Country Local Risk Premium
Case A Local Contribution
Case BLocal Contribution
A 500 100 100
B 500 -50 -150
C 250 50 50
D 750 -100 -150
E 750 200 -200
F 1.250 150 150
Total 4.000 350 - 200
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Case A – positive Pool Result
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E200
D -100D -100
F150
B-50B-50
C50
A100
A70
C35
E140
F105
Total350Total350
Client will receive an International Dividend
Losses B & D covered by margins A, C, E & F
Case B – negative Pool Result
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E-200E
-200
D -150D -150
F150
B-150B-150
C50
A100
Total-200Total-200
B-60B-60
D-60D-60
E-80E-80
No International Dividend. Loss is carried forward to the
following year
Margins A, C & F not sufficient to cover losses B, D & E
Win-win situation
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Multinational & subsidiaries Network insurers
More flexible underwriting Sharing of Risk with network
Potential cost savings Limitation to local losses
Central contact point for other services New leads to international companies
Local terms & conditions apply Higher retention of pooled clients
HQ monitors & controls costs, claims &
benefit levels
International reputation
Contracts with leading (inter)national
insurers
Facts & Figures
• Currently +2,500 pools with 8 networks
• Represents approx. $ 5 Billion of annual premium
• International dividend:
+ Projected around 10 % of risk premium
+ Usually shared back with subsidaries
• Different types of pooling depending on:
+ Number of plans/insured lives in the pool
+ Risk-appetite of the client
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International Networks
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Maxis