What is multinational pooling?
It is a global financing mechanism that allows multinational organisations to benefit from favourable claims experience on life and health insurance through the payment of dividends and achieving purchasing scale.
Where can employers get more information?
The International Employee Benefits Association
Who are the main providers in the market?
All Net, Generali Employee Benefits Network, ING Global Employee Benefits Network, Insurope, International Group Program (IGP), In2Matrix, Maxis Global Benefit Network, Swiss Life Network, Zurich Employee Benefits Network.
International organisations can achieve significant cost savings by joining a multinational pool arrangement for benefits such as group life and income protection, says Edmund Tirbutt
Large and medium-sized employers with overseas operations can benefit from placing international group life and health insurance schemes within a multinational pooling network. This can enable them to gain from favourable claims experience worldwide by receiving a regular international dividend, which can be as high as 15% of premiums paid.
This approach can also produce discounts on premiums by leveraging employers’ international presence via economies of scale, obtaining data that can facilitate the implementation of a consistent, transparent, organisation-wide benefits strategy and enable flexible underwriting that can lead to benefit enhancements.
Malcolm Penny, regional director, UK and Ireland, at Insurope, says: “The key products for multinational pooling are group life cover and income protection. Technically, group critical illness cover can be included, but we see little of it because most tends to be offered via flexible benefits, and we do not believe anything should be pooled if employees are paying the premium.
“There is also relatively little pooling of private medical insurance (PMI) by UK employers because it operates on very slim margins and a lot is already working on a local profit-share basis. PMI written under a healthcare trust cannot be incorporated because it is not technically using insurance.”
Different levels of protection
Different types of pool offer different levels of protection. For example, stop-loss pools offer the protection of any losses being absorbed by the pool’s network partners at the end of each reporting period. Under a loss carry-forward pool, meanwhile, any losses will carry forward to the next reporting period.
Employers are eligible to join a pool if they have about 300 staff covered by life or health schemes in at least two different countries, although those with only 100 lives covered can join a multi-employer scheme. Organisations with several thousand lives may want to go a stage further and take some of the risk by setting up their own captive insurer.
Multinational pooling involves no explicit costs, unless a consultant is used for matters such as network selection. If the pool makes a profit, the employer receives a dividend and effectively gets a profit share on the money it has paid in. Nick Homer, proposition development manager at Zurich Corporate Risk, says: “Employers can be better off as a result of economies of scale and receiving dividends.”
But only a minority of eligible employers actually use multinational pooling arrangements. Some intermediaries fear that mentioning this approach could tempt organisations to switch to larger global competitors, and there is also a widespread misconception that it is hard to understand or must be too good to be true.
Lee Thurston, director of JLT Benefit Solutions, says: “Multinational pooling should be a no-brainer but I would guess that less than 25% of [employers] that could use it do so, which is unbelievable. Employers often think there is a catch or that it is more complex than it is, and it can be hard to pinpoint the relevant decision-makers at [organisations] that would benefit.”
Falling UK group risk premiums have also diluted the benefits of multinational pooling in recent years, but current rate-hardening could reawaken interest.
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