Multinational Pooling Insurance Page

Who helps you today to navigate international risk management and global benefits for expatriates, TCNs, foreign nationals and global travelers?

The 3 most important reasons to team with us for international group insurance needs are outlined below:

There is no cost to have McKinley International on "retainer" and we share advice with clients every day with no consulting fees.

If you employ expatriates and other international assignees, you never know what may cross your desk and you need a partner that can navigate ANY issue that may come your way.

Your current broker or consultant may lack international experience (99% do), and there is no conflict because we do NO U.S. domestic benefits.

The major multinational pooling companies in the world are show below.

Multinational Pooling and admitted insurance for local nationals and companies that hire foreign nationals.

What is multinational pooling? Multinational pooling defined: The process of combining insurance policies for local nationals in more than 1 country, into a larger experience rated insurance policy eligible for dividend payment. In the past, a company that employs local national employees in, for example 10 countries, may have had 10 independent insurance arrangements for local nationals for international life insurance, international long term disability insurance, and medical insurance. The size of each country group, or the number of local nationals in each country may have been too small to offer "experience rating" to the global employer. In this case, experience rating means that premium can be returned if claims were under a certain level.

Using international medical as an example, a group of 50 employees would never be experience rated because it's just too small. A group of 500 employees in a particular country could be fully experience rated due to it's large size. Multinational pooling looks at collective group and it's total size to see if experience rating can be offered, even if some group sizes in several countries are very small.

There are three important concepts:

First, it looks at local benefit programs for local nationals (a Mexican National working in Mexico for example) and not expatriates or travelers.

Second, it attempts to create a multi-country experience rated program where good claim results across all countries may produce a surplus or even a dividend to the employer. For example, if 5 countries have a claim surplus of $100,000 each because of good claims, and 4 countries have a claim deficit of $100,000 each from poor claims, the global employer would still be in a surplus situation ($500,000 - $400,000 = $100,000)

Third, many of the local country insurance plans could not benefit the employer in a good claim year if the pooling program was not in place. For example, some insurers in certain countries may require several hundred lives in order to offer experience rated plans that are not pooled. Experience rated groups have future claim cost set from prior years of claim experience and in some instances, the surplus can be returned by the insurer via a dividend. Most countries that have, say, under 100 employees could not be experience rated due to small group sizes. Under a multi-national pooling scheme, all countries, even those with as few as 5 employees, are included in the global experience rating scheme a pooling program affords.

In other words, without a multinational pooling program an employer may have 10 insurance plans in 10 different countries with 10 different insurers that in no way work together. Multinational pooling works as follows: a First Stage Accounting reflects the experience of a participating insurance policy in a given country. By Second Stage Accounting or "pooling" policies that a company provides in several countries, savings are generated through economies of scale and efficiencies in administration and reporting. First Stage Accounting reflects what occurs under a group employee benefits policy in the absence of a pooling network. First Stage Accounting is the calculation of the net cost of insurance to the subsidiary, which is the premium less the local dividend (profit sharing), if applicable.

Multinational Pooling Advantages

In summary, The advantages of setting up a multi-national pooling arrangement (or establishing a multinational pool as it is said) is the following:

  1. The entire local national insurance group is eligible for experience rating
  2. Countries with small numbers of local nationals can still participate
  3. Possible dividend check back to the parent company after final year end accounting.
  4. More control by the parent company vs. each country doing their own thing. Coordination through the multinational pooling company (pooling company like Swiss International, IGP, Zurich, AIG, etc)
  5. Cost savings and efficiencies
  6. 1 point of contact for many issues

Multinational Pooling Disadvantages (there are few)

Disadvantages are few and far between:

  1. Some disruption, and local nationals in certain countries may need to change to an insurer that is "in the multinational pooling network."
  2. In some countries the carrier in the chosen pool may not be the top insurer and in rare instances, service or coverage could suffer.

In these cases, certain countries can be left out of the pool

All coverage is provided through local policies issued by Associate Insurers to participating subsidiaries. From the employees' point of view, these are standard policies issued by prominent, locally admitted, national insurance companies. Each policy's plan design reflects local market practice. From local management's point of view, the arrangement is as good as, and often better than, what can be obtained locally, even before considering the additional advantages of pooling. The pooling company combines the experience of each participating local insurance policy (First Stage Accounting) to create the client's International Account. An annual Second Stage Accounting is then prepared for each of these policies, which generates additional savings by taking into account the expenses, risk, and claims of the company's entire pooled employee group worldwide.

In this accounting:

• Expense and risk charges are based on competitive standards and reflect the economies of scale that result from buying coverage in several countries from a single source. They also reflect the reduced risk resulting from combining the experience of the policies worldwide.

• Claims are the actual claims and/or pooled claim charges. Pooled claim charges limit the amount of individual claims that can be charged to the International Account. This protects the account from deficits caused by the death or disability of a highly compensated individual. The annual Second Stage Accounting determines, for each policy, a Contribution to the International Account (CIA), as follows: Premium Paid +

• Investment Income Earned on any Reserves Established Under the Policy

• Investment Income Credited (Debited) on Premium Float (Where Applicable) Less:

• Claims and Change in Reserves (if any)

• The Expense and Risk/Profit Charges Determined in Accordance With IGP Standards

• Commissions and Taxes

• The Local Dividend Paid (if any) Equals =: Contribution to the International Account The Contribution to the International Account (CIA) is positive if the experience has been average or better than average in a given year, or negative if the experience has been poor

This page is about multinational pooling for local national insurance.