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Time to jump into the pool?

28 February 2017

If you are an employer with international operations but haven't yet considered using a multinational pooling arrangement for your employee benefits schemes then you could well be missing a trick.

The approach, which can be available to employers with employee benefits schemes in at least two different countries, allows you to draw added value from around the globe via a sophisticated insurance technique.

The risk portions of the insurance and savings plans of your subsidiaries can be combined into an international portfolio specific to your own company - called a pool - with a multinational pooling network. Provided the coverages are locally available and poolable, this can include: retirement, group life and survivors' benefits, disability (long- and short-term), medical, accidental death & dismemberment and critical illness cover.

Using a multinational pooling network spreads your insured risk and allows you to benefit from favourable insured claims experience on a global basis. You also receive an international dividend if the year-end balance is positive, so you will effectively be getting a profit share on the money you have paid in.

The dividend amounts can be highly significant. For example, The Swiss Life pooling network* reports that since 2004 it has paid out 29% of the positive results or 11% of the risk premium of its multi-client rofitable pools.

Additionally, the approach can leverage your international presence via economies of scale and enable you to obtain discounts on premiums, enjoy access to valuable employee benefits plan information around the world and facilitate benefit alignment at a group level, therefore making it easier to implement a consistent company-wide strategy.

You may also be able to benefit from a more flexible underwriting framework, which can result in benefit enhancements and more generous free-cover limits.

At the same time, it is hard to see that multinational pooling involves any real downsides. Once a network has been selected, there are normally no additional costs involved and your subsidiaries' local insurance contracts will remain unaffected.

Premiums, local dividends, local experience rating and commissions will all remain unchanged, as will local and international relationships with brokers and consultants. But the local contracts may, on the other hand, now be eligible for advantageous underwriting conditions due to pooling.

Some multinational pooling networks will offer company-specific schemes to those with annual premiums of only £200,000 and two contracts with a total of over 100 lives. Furthermore, companies who are too small to satisfy such limits can still enjoy many of the advantages of pooling by participating in a multi-client pool. This can be available to schemes that involve only a single country and as few as 10 insured lives.

A multi-client pool, which can eventually be developed into a company-specific pool, can still offer the possibility of an international dividend, a stop-loss accounting system, information to the parent organisation on local contract inclusion and the inclusion of details of top risks in the pool annual summary.    

It is somewhat puzzling that many eligible companies have still yet to take advantage of multinational or multi-client pooling but the main barrier is probably that employers tend to be suspicious of something that seems too good to be true. There is also a widespread misconception that the facilities are somehow too complex to understand and implement. But there are no hidden catches and a pooling network and expert intermediary can handle virtually all the administration on your behalf.

A further problem can arise from the fact that it isn't always clear who the decision maker should be within the client company. It could, for example, be the insurance manager or someone from the finance department or HR or compensation and benefits team. But an expert intermediary will make it a high priority to pinpoint the most appropriate individual. It will also be able to select the most suitable multinational pooling network for your organisation from the extensive range of options that are available.

If you would like to receive more information about multinational pooling, advice on how it can work for your company or help with the selection of the most suitable network then please do not hesitate to contact Chase de Vere on 0345 300 6256.

 *Swiss Life Actuary/Technical Pooling Unit