Multinational Pooling

Multinational pooling is a contract that allows multinational organizations to purchase their employee benefits insurance policies, also known as group insurance policies, on a global basis, and benefit from a probable reduction in insurance premiums or from a global share of underwriting profits, as well as from enhanced reporting and transparency.^[1] The contract is made between a multinational organization (usually, its headquarters) and a pooling network. It typically is a service contract, not an insurance or reinsurance policy.^[2]

Scope[edit]

Employee benefits that can be included in a multinational pooling arrangement (also known as a "multinational pool", or simply a "pool"), comprise health insurance (including sickness, hospitalization, dental, vision, etc.), life insurance (death, disability), and the risk component of insured pension plans (eg, survivor's pension, retiree medical, ...).

Mechanism[edit]

Instead of purchasing its employee benefits on a country-by-country basis, the multinational organization enters into a global agreement with a network of insurers having presence all over the world and purchases its local insurance policies from the local representative of the network^[3]. In the context of employee benefits, a multinational organization is a business, a government body, a quasi-governmental organization, an association, that has salaried employees in at least two countries. The words "multinational" and "transnational" are used interchangeably. Multinational pooling has also been defined as a "cost-containment strategy in which several small insurance policies from each locale where the multinational has a significant presence are combined into a single comprehensive policy."^[4]

Multinational organizations range from the very small (fewer than 20 employees) to the very large (several hundred thousands). Multinational pooling typically is offered to organizations having 500 employees or more.

Multinational dividend[edit]

The reduction in price brought about by multinational pooling consist of an ex-post "multinational dividend" or "multinational profit sharing". In effect, it is similar to an ex-post rebate. The amount of the multinational dividend is equal to the insurers' worldwide net profit above a certain pre-agreed threshold. If the insurers' worldwide net profit does not reach the threshold, no multinational dividend is paid back to the multinational. Multinational dividends are computed and paid on a yearly basis.

Insurers' worldwide net profits are highly dependent on the amount of claims incurred. In years with low claims ("good experience"), up to 40% of premiums paid can be returned. In years with high claims ("poor experience"), nothing is returned. In practice, employee benefits premiums are set high enough that an average 7-10% of premiums is paid back as international dividends.^[5] Multinational pooling thus permits multinational companies to benefit from favorable claims experience on a worldwide basis." ^[6]

Providers[edit]

As of August 2018, eight global networks^[7] and one regional network are in existence.

Size of market[edit]

Exact numbers remain unavailable but current best estimates of pooled insurance premiums range from $5 to 6 billion (2017) and approximately 3 to 4,000 multinational organizations have at least one pooling arrangement in place.

Alternatives to multinational pooling[edit]

Multinational pooling is one of three main global employee benefits purchasing techniques, along with employee benefits captives and global underwriting programs.

References[edit]

↑ Muller-Borle, Eric (2014). "EasyPooling - Frequently Asked Questions". www.easypooling.com.
↑ Ott, M. (2006). Pooling of Employee Benefits. In Encyclopedia of Actuarial Science (eds J. L. Teugels, B. Sundt and M. d. Centeno).
↑ Issues in global human resources, Janush, Erwin. Risk Management; New York Vol. 50, Iss. 7, (Jul 2003): 42.
↑ Tracey, William R.; The Human Resources Glossary: The Complete Desk Reference for HR Executives, Managers, and Practitioners; CRC Press, April 2016
↑ Shimer, Paul M.; Benefits Quarterly; Brookfield; Vol. 12, Iss. 1, (First Quarter 1996): 8.
↑ Biswas, Baskker D.; Employee Benefits Design and Planning: A Guide to Understanding Accounting, Finance, and Tax Implications; Pearson Education; April 2014
↑ "Multinational Pooling Networks - Headquarters – Global Benefits Vision". Global Benefits Vision. 2018-05-29. Retrieved 2018-08-04.

External sources added (books)[edit]

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[1] Muller-Borle, Eric (2014). "EasyPooling - Frequently Asked Questions". www.easypooling.com.

[2] Ott, M. (2006). Pooling of Employee Benefits. In Encyclopedia of Actuarial Science (eds J. L. Teugels, B. Sundt and M. d. Centeno).

[3] Issues in global human resources, Janush, Erwin. Risk Management; New York Vol. 50, Iss. 7, (Jul 2003): 42.

[4] Tracey, William R.; The Human Resources Glossary: The Complete Desk Reference for HR Executives, Managers, and Practitioners; CRC Press, April 2016

[5] Shimer, Paul M.; Benefits Quarterly; Brookfield; Vol. 12, Iss. 1, (First Quarter 1996): 8.

[6] Biswas, Baskker D.; Employee Benefits Design and Planning: A Guide to Understanding Accounting, Finance, and Tax Implications; Pearson Education; April 2014

[7] "Multinational Pooling Networks - Headquarters – Global Benefits Vision". Global Benefits Vision. 2018-05-29. Retrieved 2018-08-04.

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