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

contact@benevista.com

+32 3 281 10 06

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